Problem
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 $320,000. During 2024, Halifax sold merchandise on account for $11,700,000. Halifax's merchandise costs are 75% of merchandise selling price. Also during the year, customers returned $460,000 in sales for credit, with $255,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. Sales returns, estimated to be 4% of sales, are recorded as an adjusting entry at the end of the year.
Task
Prepare entries to (1) record actual returns in 2024 of merchandise that was sold prior to 2024; (2) record actual returns in 2024 of merchandise that was sold during 2024; and (3) adjust the refund liability to its appropriate balance at year end. What is the amount of the year-end refund liability after the adjusting entry is recorded?