Assume the perpetual inventory method is used. 1) The company purchased $13,200

Question

Assume the perpetual inventory method is used. 1) The company purchased $13,200 of merchandise on account under terms 3/10, /30. 2) The company returned $2,700 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $20,400 cash. What effect will the return of merchandise to the supplier have on the accounting equation? Multiple Choice Assets and liabilities are reduced by $2,619. Assets and equity are reduced by $2,700. None. It is an asset exchange transaction. Assets and liabilities are reduced by $2,700.

Explanation / Answer

Ans:

Assets and liabilities reduced by 2,700$

Because purchase return of merchandise will decrease both supplies in assets side and suppliers Account i.e Accounts payable in liabilities side

No effect on equity

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