The Martin Company had the following transactions. (Assume the perpetual invento

Question

The Martin Company had the following transactions. (Assume the perpetual inventory method is used.)
Event a: The Company purchased $5,000 of merchandise on account under terms 2/10, n/30.
Event b: The Company returned $600 of merchandise to the supplier before payment was made.
Event c: The liability was paid within the discount period.
Event d: All of the merchandise purchased was sold for $6,500 cash.
What effect will the return of merchandise to the supplier have on the accounting equation?
a. Assets and equity are reduced by $600.
b. Assets and liabilities are reduced by $570.
c. Assets and liabilities are reduced by $600.
d. Liabilities and equity are reduced by $600.

Explanation / Answer

d

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