Record the year-end adjusting entry for estimated returns

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Reference no: EM133497277

Case: 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 2024 with a refund liability of $440,000. During 2024, Halifax sold merchandise on account for $12,900,000. Halifax's merchandise costs are 65% of merchandise selling price. Also during the year, customers returned $630,000 in sales for credit, with $347,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 5% of sales, are recorded as an adjusting entry at the end of the year.

1e. Record the year-end adjusting entry for estimated returns.

Reference no: EM133497277

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