Crane Choice sells natural supplements to customers with an unconditional sales

Question

Crane Choice sells natural supplements to customers with an unconditional sales return if they are not satisfied. The sales returns period extends 60 days. On February 10, 2018, a customer purchases $5100 of products (cost $2550). Assuming that based on prior experience, estimated returns are 20%. The journal entry to record the actual return of $360 of merchandise includes a

debit to Estimated Inventory Returns for $180. debit to Returned Inventory for $180. credit to Allowance for Sales Returns for $360. credit to Returned Inventory for $180.

Explanation / Answer

Ans debit to Returned Inventory for $180.

Since the inventory has been returned, we would debit the Inventory by the cost of inventory (50% of 360 = $ 180)

Inventory is an asset, thus is to be debited, as assets are to be debited and liabilities to be credited.

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