There are several ways to apply vendor refund payments but the easiest way is to allow the original vendor charge to stand as is, and then post the payment as customer payment.  Our accountant has us post these as "Other Income".  This is also handy for vendor rebates which are not tied to any specific item, such as volume rebates like Costco annual member rebates.

When you use the Receive Money window and change the ID field from Customer ID to Vendor ID, Sage 50 assumes that the vendor was giving you a refund for an existing credit memo. The entries that you see in the Pay Bill window are intended to offset that credit.

You can either enter vendor credit memos to offset those entries or you can record the refunds differently.

When recording the refund check in Receive Money, you can skip over the vendor ID field entirely and just type the vendor name in the Name field, then proceed with the rest like normal. I would set the GL account to the same account used on your FedEx invoices.

The advantage to this method is that it saves steps over entering a vendor credit memo and then applying that credit memo to the refund "invoice". The down side is that the refund won't be linked to FedEx's vendor record. So you can decide which is more important to you.

This needs to be fixed. The ASSUMPTION... haha, that's a problem. 

The ability exist to write a check without a Payables Invoice. Likewise, there should be the facility to receive monies without an AR Bill. AND that ability should allow for the entity to be recorded. All those IRS/Treasury Department refunds that have to be recorded either without the "Vendor" name or forcing a CreditMemo?
The only understandable part for a CM is if the amounts are going to multiple GL Accounts and the businesses preferred method is to record on a CM and not distribute through a General Journal entry.