Assume the perpetual inventory method is used. 1) The company purchased $12,600

Question

Assume the perpetual inventory method is used. 1) The company purchased $12,600 of merchandise on account under terms 2/10, n/30. 2) The company returned $2,100 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 $19,200 cash What effect will the return of merchandise to the supplier have on the accounting equation? Multiple Choice Assets and equity are reduced by $2,100. Assets and liabilities are reduced by $2,058 Assets and liabilities are reduced by $2,100. 1 5 None. It is an asset exchange transaction.

Explanation / Answer

If merchandise return that means inventory decrease so assets decrease and inventory return so account payable decrease so liabilities decrease.

so answer is c) Assets and liabilities are reduced by $2,100

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