Halifax Manufacturing allows its customers to return merchandisefor any reason up to 90 days after delivery and receive a credit totheir accounts. All of Halifax’s sales are for credit (no cash iscollected at the time of sale). The company began 2016 with anallowance for sales returns of $440,000. During 2016, Halifax soldmerchandise on account for $12,900,000. This merchandise costHalifax $8,385,000 (65% of selling prices). Also during the year,customers returned $630,000 in sales for credit. Sales returns,estimated to be 5% of sales, are recorded as an adjusting entry atthe end of the year.
Required:
1. Prepare the entry to record the merchandise returns and theyear-end adjusting entry for estimated returns. Note: Record theestimated returns at net amounts. (If no entry is required for atransaction/event, select “No journal entry required” in the firstaccount field.)
2.
What is the amount of the year-end allowance for sales returnsafter the adjusting entry is recorded?
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