Question

False Value Hardware began 2021 with a credit balance of $32,000 in the refund liability account. Sales and cash collections from customers during the year were $640,000 and $600,000, respectively. False Value estimates that 6% of all sales will be returned. During 2021, customers returned merchandise for credit of $19,000 to their accounts. What is the balance in the refund liability account at the end of 2021

Answer 1

$49,000

Step-by-step explanation:

$32,000 (Balance in allowance account)+ ($600,000 (sales) × 6%) - 19,000

=$32,000+$36,000- $19,000

=$68,000-$19,000

=$49,000

Therefore the balance in the refund liability account at the end of 2021 is $49,000