their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2021 with a refund liability of $420,000. During 2021, Halifax sold merchandise on account for $12,700,000. Halifax's merchandise costs is 60% of merchandise selling price. Also during the year, customers returned $619.000 in sales for credit, with $342.000 of those being returns of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; 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?
their accounts. All of Halifax's sales are for credit (no cash is collected at the time of sale). The company began 2021 with a refund liability of $420,000. During 2021, Halifax sold merchandise on account for $12,700,000. Halifax's merchandise costs is 60% of merchandise selling price. Also during the year, customers returned $619.000 in sales for credit, with $342.000 of those being returns of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year. Required: 1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of merchandise that was sold during 2021; 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?
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 up to 90 days after delivery 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 2021 with a refund
liability of $420,000. During 2021, Halifax sold merchandise on account for $12,700,000. Halifax's merchandise costs is 60% of
merchandise selling price. Also during the year, customers returned $619,000 in sales for credit, with $342,000 of those being returns
of merchandise sold prior to 2021, and the rest being merchandise sold during 2021. Sales returns, estimated to be 5% of sales, are
recorded as an adjusting entry at the end of the year.
Required:
1. Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of
merchandise that was sold during 2021; 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?
Complete this question by entering your answers in the tabs below.
Required 1 Required 2
Prepare entries to (a) record actual returns in 2021 of merchandise that was sold prior to 2021; (b) record actual returns in 2021 of
merchandise that was sold during 2021; and (c) adjust the refund liability to its appropriate balance at year end. (If no entry is required
for a transaction/event, select "No journal entry required in the first account field.)
View journal entry worksheet
View transaction Bat
No
1
Year
2021
Refund liability
Accounts receivable
General Journal
Debit
342,000
Credit
342,000
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