Question

Estimated Returns Inventory is a. an asset account reported with Inventory on the balance sheet. b. an owner's equity account increasing equity. c. a liability account with a normal credit balance. d. None of these choices, since this account does not exist.

Answer 1

a. an asset account reported with Inventory on the balance sheet.

Step-by-step explanation:

This is because estimated returns inventory is the amount of inventory that will be returned by debtors, on their purchase if they do not find the goods that worthy, or due to some other reasons, based on past experience this is generally an allowance and this is added to inventory balance as this will increase inventory, though generally it is accounted like this but some companies do not tend to make a provision for such inventory and account for at the time when inventory is actually returned.

Final Answer

a. an asset account reported with Inventory on the balance sheet.