Do I have to give him back her money?

I sold an Iphone 4s to this girl. We met and she got a chance to see it, feel it out and test it. She was ok with the condition. Later that day I get a message saying that something is wrong with its software and that blah blah she wants her money back. I don't what the problem is that she is having and I used 40% of the money she gave me in alcohol.
What should I do?

She bought as is, you had no contract it's no longer your problem.

Well, if you ever sell anything you should always discuss return policies. Meet with her again (don't bring the money, I don't know how well you know her but if she's mad you could be in harms way). Try to help her with the situation. Tell her to call apple. Maybe bring a friend who's good with technology. If the phone is unfix able, tell her you will not return it. If there were no documents transferred or any return policy agreement, you don't have to worry about legal consequences.
Buying a phone from someone always has it's risks. She should of known this before engaging. Tell her you spent all the money, and that you're very sorry.

Once they checked it out it was theirs, at that point you have no idea what they did to it. They could have dropped it. Its theirs once the sale is done.

She checked it out and all was fine the last you saw of it so no you really don't have to. She may have damaged it. When you buy some thing used there's a saying ( Buyer beware ) !