Halifax Manufacturing allows its customers to return merchandise for any reason and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2024 with a refund liability of $390,000. During 2024, Halifax sold merchandise on account for $12,800,000. Halifax's merchandise costs are 70% of merchandise selling price. Also during the year, customers returned $370,000 in sales for credit, with $204,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 3% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare entries to (a) record actual returns in 2024 of merchandise that was sold prior to 2024; (b) record actual returns in 2024 of merchandise that was sold during 2024; and (c) adjust the refund liability to its appropriate balance at year end. 2. What is the amount of the year-end refund liability after the adjusting entry is recorded? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the amount of the year-end refund liability after the adjusting entry is recorded? Ending balance in refund liability $ 218,000 < Required 1 Required 2 >
Halifax Manufacturing allows its customers to return merchandise for any reason and receive a credit to their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2024 with a refund liability of $390,000. During 2024, Halifax sold merchandise on account for $12,800,000. Halifax's merchandise costs are 70% of merchandise selling price. Also during the year, customers returned $370,000 in sales for credit, with $204,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 3% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare entries to (a) record actual returns in 2024 of merchandise that was sold prior to 2024; (b) record actual returns in 2024 of merchandise that was sold during 2024; and (c) adjust the refund liability to its appropriate balance at year end. 2. What is the amount of the year-end refund liability after the adjusting entry is recorded? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 What is the amount of the year-end refund liability after the adjusting entry is recorded? Ending balance in refund liability $ 218,000 < Required 1 Required 2 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Halifax Manufacturing allows its customers to return merchandise for any reason and receive a credit to their accounts. All of Halifax's
sales are for credit (no cash is collected at the time of sale). The company began 2024 with a refund liability of $390,000. During
2024, Halifax sold merchandise on account for $12,800,000. Halifax's merchandise costs are 70% of merchandise selling price. Also
during the year, customers returned $370,000 in sales for credit, with $204,000 of those being returns of merchandise sold prior to
2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 3% of sales, are recorded as an adjusting entry
at the end of the year.
Required:
1. Prepare entries to (a) record actual returns in 2024 of merchandise that was sold prior to 2024; (b) record actual returns in 2024
of merchandise that was sold during 2024; and (c) adjust the refund liability to its appropriate balance at year end.
2. What is the amount of the year-end refund liability after the adjusting entry is recorded?
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
What is the amount of the year-end refund liability after the adjusting entry is recorded?
Ending balance in refund liability
$
218,000
< Required 1
Required 2 >
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