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 $390,000. during 2024, halifax sold merchandise on account for $13,300,000. halifax's merchandise costs are 65% of merchandise selling price. also during the year, customers returned $386,000 in sales for credit, with $213,000 of those being returns of merchandise sold prior to 2024, and the rest being merchandise sold during 2024. sales returns, estimated to be 3% of sales, are recorded as an adjusting entry at the end of the year.
