Hi John McAdam, 

Thanks for reaching out.  Did you ever find an answer to your question?

We have this blog with Quick Tips for adjusting and transferring inventory in Sage 50 Canada, handy for dealing with damaged goods involved in warranty replacement. 

In particular, see:

Handy tip #2: Has someone broken something? Need to adjust your inventory upwards or downwards? Visit the Adjust Inventory icon.

In this example, someone dropped a helmet, notice that the quantity column is reflecting this as a minus 1.

Note*: In FIFO you can't adjust unit costs but in Weighted Average you can.

The damaged inventory GL entry would look like below:

Hope this helps!

Warm Regards, 
Erzsi