Question

prepare entries to (a) record actual returns in the current year of merchandise that was sold prior to the current year; (b) record actual returns in the current year of merchandise that was sold during the current year; and (c) 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?

Answer 1

Okay, let's break this down step by step:

1) Record actual returns from prior years:

This would result in a debit to Returns and Allowances Expense and a credit to Cash or Accounts Receivable depending on the method of refund.

2) Record actual returns from current year sales:

Again, similar entries debiting Returns and Allowances Expense and crediting an asset account.

3) Adjust refund liability at year end:

If the actual refund liability (based on estimating unprocessed returns) is different than the amount already recorded, an adjusting entry would be made to properly state the liability. This would debit or credit the Refunds Payable account.

So in summary, entries will be made to expense the actual returns, decrease an asset account for the refunds issued, and adjust the refund liability to the appropriate balance.

The amount of the year-end refund liability after these adjusting entries would depend entirely on your specific company's numbers - actual returns processed, estimated unprocessed returns, and any adjustments needed to the refund payable account. There is not enough information provided to determine a specific amount for the year-end refund liability.

Hope this helps! Let me know if you have any other questions.