Monty company sold goods for $64000 on account to oriole Inc. November 20. cost of goods sold is 25% of sales. oriole has 60 days to return the goods for any reason. based on past experience Monty expects oriole to return 25% of the goods which it expects to be able to resell the returned goods at a profit. on December 1 oriole returns $14000 worth of goods. if Monty has a December 31 year end the adjusting journal entry for this sale

a debit to returned inventory for $1500 and refund liability for$1500 will include a debit to sales returns and allowance for $2000 and a credit to returned inventory for $2000 is not needed will include a debit to sales returns and allowance for $2000 and a credit to refund liability for $2000