I have a situation where inventory purchased on account was returned damaged. The original value of sale was $60. I am told the salvage value of the inventory is $20 and to record the inventory at its salvage value.

1st possible way to journalize?:
Sales Returns & Allowance debit $60
AR - Customer acct credit $60
Inventory debit $20
COGS credit $20

But I am wondering if:
Sales Ret & Allow should be debit $20 (salvage amount)
AR stays the same at $60
Inventory stays the same at $20
COGS should be credit $60

Any help on this would be appreciated. I kind of think the 1st journal entries are correct but I started thinking about the value of the COGS & whether it should be salvaged like Inventory or the original $60

1st two are right.. but that's all you got..

When you sold it there were 2 transaction types asset and income..
sales +60c, AR +60d AND (assuming that you sell stuff at a profit??)
Inventory asset +40c, and COGS +40d This generated a net profit of 20.

now lets reverse this...
sals +60d, AR 60c AND now
Salvage asset +20d and shrinkage/breakage exp +20d and COGS 40c
journal the return lowering sales income and reversing the AR.

BUT - Do Not put it back in inventory at a lower price... it isn't - it is now salvaged..

Journal when you sold it you lowered your inventory by cost