Final answer:
To record the return of defective units, the factory manager should follow proper accounting procedures by debiting the accounts payable or purchase return account and crediting the inventory account. Keeping track of defects helps assess the quality control process.
Step-by-step explanation:
In order to record the return of 120 defective units purchased on January 12, the factory manager needs to follow proper accounting procedures. They should debit the accounts payable or purchase return account to reduce the amount owed to the supplier, and credit the inventory account to reduce the quantity on hand.
This transaction will ensure that the defective units are accurately reflected in the factory's financial records and inventory. It is important to keep track of defects to assess the quality control process and make any necessary adjustments.