In January, a retailer sells 300 paper shredders to customers for $100 each. The terms of the

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Question:

In January, a retailer sells 300 paper shredders to customers for $100 each. The terms of the sales include a right for the customer to return a shredder within 180 days of the sale date. Based on historical trends, the retailer uses the expected value method and estimates a 35% probability that 24 paper shredders will be returned, a 40% probability that 27 paper shredders will be returned, and a 25% probability that 36 paper shredders will be returned. The retailer also concludes it is highly probable that there will not be a significant reversal of revenue recognized based on this return estimate. Thus, the agreement is a valid contract. Assume no actual returns in January.

Determine

(1) the transaction price for the sale of shredders for January

(2) the refund liability balance on January 31.