On August 5, Oriole Ltd. sells goods for $1530 and the cost to Oriole was $700. Oriole expects a return rate of 5%. On August 12, goods with a selling price of $440 and a cost of $245 are returned for credit and restored to inventory. The journal entry to record the return will include a a>credit to Estimated Inventory Returns for $245. b>credit to Inventory for $245. c>debit to Accounts Receivable for $440. d>credit to Refund Liability for $440.

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.