alifax 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 2024 with a refund liability of $470,000. During 2024, Halifax sold merchandise on account for $13,200,000. Halifax's merchandise costs are 60% of merchandise selling price. Also during the year, customers returned $524,000 in sales for credit, with $289,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 4% of sales, are recorded as an adjusting entry at the end of the year. Required: 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. What is the amount of the year-end refund liability after the adjusting entry is recorded?
alifax 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 2024 with a refund liability of $470,000. During 2024, Halifax sold merchandise on account for $13,200,000. Halifax's merchandise costs are 60% of merchandise selling price. Also during the year, customers returned $524,000 in sales for credit, with $289,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 4% of sales, are recorded as an adjusting entry at the end of the year. Required: 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. What is the amount of the year-end refund liability after the adjusting entry is recorded?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 6MC
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alifax 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 2024 with a refund liability of $470,000. During 2024, Halifax sold merchandise on account for $13,200,000. Halifax's merchandise costs are 60% of merchandise selling price. Also during the year, customers returned $524,000 in sales for credit, with $289,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 4% of sales, are recorded as an
Required:
- 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.
- What is the amount of the year-end refund liability after the adjusting entry is recorded?
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