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 $360,000. During 2021, Halifax sold merchandise on account for $12,100,000. Halifax's merchandise costs is 70% of merchandise selling price. Also during the year, customers returned $594,000 in sales for credit, with $328,000 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?

1	2021	Refund liabilityselected answer correct	328,000selected answer correct	not attempted
		Accounts receivableselected answer correct	not attempted	328,000selected answer correct
2	2021	Inventoryselected answer correct	229,600selected answer correct	not attempted
		Inventoryestimated returnsselected answer correct	not attempted	229,600selected answer correct
3	2021	Sales returnsselected answer correct	266,000selected answer correct	not attempted
		Accounts receivableselected answer correct	not attempted	266,000selected answer correct
4	2021	Inventoryselected answer correct	186,200selected answer correct	not attempted
		Cost of goods soldselected answer correct	not attempted	186,200selected answer correct
5	2021	Sales returnsselected answer correct	339,000 selected answer incorrect	not attempted
		Refund liabilityselected answer correct	not attempted	339,000 incorrect