Knowledge Check 01 At the end of its first year of operations, Loring Industries estimates that sales returns in the amount of $20,000 will occur during Year 2. The cost of the inventory expected to be returned is $12,000. All of Loring's sales are made for cash and the company uses a perpetual inventory system. Assume that no returns have occurred as of the end of Year 1. Prepare the appropriate adjusting journal entry to record the expected sales returns and the inventory expected to be returned in Year 2. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Journal entry worksheet Record the $20,000 estimate of expected returns from customers. Note: Enter debits before credits. Event General Journal Debit Credit 01 Record entry Clear entry View general journal Journal entry worksheet Record the $12,000 estimate of the cost of inventory expected to be returned by customers. Note: Enter debits before credits. Event General Journal Debit Credit 02 Record entry Clear entry View general journal