During 2019, Reed Corporation Sold Merchandise for a Total of $900,000

During 2019, Reed Corporation sold merchandise for a total of $900,000. The cost of merchandise to Reed was $675,000. Reed allows a 60 day return period for the merchandise it sells. At year-end, Reed estimates there are $105,000 of sales (with a cost of $78,750 to Reed) that are still within the 60-day return period. From past experience, Bava believes that 10% of this merchandise will be returned. Assume Reed's fiscal year is December 31.
Reed's adjusting journal entries will include:

A) A debit to Estimated Inventory Return for $10,500
B) A credit to Cost of Goods Sold for $7,875
C) A debit to Sales Refunds Payable for $10,500
D) A debit to Sales Returns and Allowances for $7,875
E) No adjusting journal entry is required. Return will be recognized when it occurs.