Create a new invoice, and set the invoice type to 'Warranty".
Place the same customer on the invoice that the item was originally sold to.
Place a quantity 1 of the item on the invoice to replace the defective item with a new one from inventory.
Place a quantity -1 of the item on the invoice to return the defective item into inventory.
All pricing will default to zero.
TSS will show a notification message that the item being returned will be flagged as defective.
Post the invoice.
The inventory screen will show one quantity has been added to defective, and one removed from available.