Question: Rusty Hardware does cash sales only. You started 2016 with a credit balance of $32,000 in the refund liability account. Sales during 2016 were $600,000.

Rusty Hardware does cash sales only. You started 2016 with a credit balance of $32,000 in the refund liability account. Sales during 2016 were $600,000. Rusty estimates that 6% of all sales will be returned. During 2016, customers returned merchandise for credit of $28,000 to their accounts. What is the balance in the provision account for sales returns at the end of 2016?

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