What journal entry should be made for customer returns of half of the original purchase?

The correct journal entry reflects the appropriate accounting treatment for customer returns. When a customer returns goods, it is necessary to record the return in the sales accounts, which is done by debiting the Sales Returns and Allowances account to recognize that the revenue initially recorded must be reversed. This is a contra-revenue account, which reduces total sales on the income statement. The corresponding credit is to Cash or Accounts Receivable, depending on whether the customer is receiving a refund or if they have an outstanding balance with the company.

In this case, the amount involved is $2,500, corresponding to half of the original purchase, which accurately reflects the transaction's impact on sales. This entry appropriately addresses the financial implications of the return, maintaining the integrity of the financial statements.

Other choices do not properly record the transaction in both the sales and cash/accounts receivable accounts as defined by accounting standards for handling returns. They may also misplace the amounts or affect incorrect accounts, which would lead to inaccuracies in financial reporting.