Accounting Question?

Question

How do you journalize a transaction where a customer returns merchandise that is scrapped and gets a refund? Do you debit goods back to merchandise inventory at full cost?
It just says that the merchandise is scrapped (no value). I cannot find anything about this on the internet!

Answer 1

When the customer first bought the merchandise, you'd have:
Dr COGS xxx
Cr Merchandise inventory xxx

When the customer returns the goods which are then scrapped, you just:
Dr Sales xxx
Cr Cash xxx

That's it. You don't put the goods back into inventory cos they're never gonna be sold again. Effectively, the sales of the co. have to cover the cost of goods which are damaged or scrapped.