>> This video is about sales related transactions. The problem provides us with information related to sales, a sales return, and credit terms. We also know that the customer returns the entire shipment. We are required to determine the amount of the refund owed to the customer when the customer makes a payment within the discount period. We are also required to prepare the journal entries made by the seller to record the return and refund. Let's first calculate the amount that the seller needs to refund to the customer. The total amount due on the sale is $35,000. We know that the customer makes a payment within the discount period. Therefore, he is allowed a 2% discount on his payment. The amount of the discount is 2% of $35,000 which is calculated as $700. By subtracting $700 from the sale the amount of $35,000, we determine the amount to be refunded as $34,300. Remember, at the end of each year, a company makes an adjusting entry that credits customer refunds payable for the estimated sales returns and allowances based upon the year's sales. The sales account is debited for the same amount. A second adjusting entry debits estimated returns inventory. And credits cost of merchandise sold for the cost of the merchandise that is expected to be returned in the next year. Next, we journalize the entries that the seller will make in order to record the return and the refund. Remember that a sales return transaction is one in which the merchandise sold is returned to the seller by the buyer. Sales returns and allowances are recorded in the customer refunds payable account. To record the return and refund, we debit the customer refunds payable account for $34,300 and credit the cash account for the same amount. Finally, we must also prepare the journal entry to update the inventory account. To record the update, we debit merchandise inventory for the cost of merchandise sold which is $21,000. And credit the estimated returns inventory account for the same amount.