Adjustments for a Merchandising Business: Perpetual Inventory System with Sales Returns and Allowances A partial Trial Balance for Curless Company as of December 31, 20-- is shown. Curless Company Partial Trial Balance For Year Ended December 31, 20-- ACCOUNT TITLE DEBIT BALANCE CREDIT BALANCE Merchandise Inventory 152,000.00 Estimated Returns Inventory 800.00 Customer Refunds Payable 750.00 Sales 425,000.00 Sales Returns and Allowances 18,000.00 Cost of Goods Sold 289,000.00 Curless has made the following estimates for next year: Sales made this year of $9,800 will be returned next year and customers will be granted full refunds. The estimated cost of the inventory sold this year and expected to be returned by customers next year is $8,900. Open T accounts and enter the balances for the above accounts. Make appropriate adjustments to the T accounts. For grading purposes use the labels shown. TB Trial balance (beginning balance) ATB Adjusted trial balance (ending balance) (1) Adjust the liability for refunds to the current estimate. (2) Adjust Estimated Returns Inventory to the current estimate. Assets Merchandise Inventory 152,000 Estimated Returns Inventory 800 (2) ATB Liabilities Customer Refunds Payable TB 750 (1) ATB Owner's Equity Revenues Sales 425,000 Sales Returns and Allowances 18,000 (1) Expenses Cost of Goods Sold 289,000 (2) Feedback Check My Work The adjustment to bring Customer Refunds Payable to the latest estimate of amounts owed for future returns is the same under periodic and perpetual inventory methods The entry to adjust Estimated Returns Inventory differs. Under the perpetual inventory method, one entry similar to the sales returns entry, is made to adjust Estimated Returns Inventory to latest estimates with Cost of Goods Sold as the offset. Cost of Goods Sold is credited because under a perpetual inventory system, inventory would have been debited and Cost of Goods Sold debited when the items originally shipped