Assume the perpetual inventory method is used. The company purchased $12,300 of merchandise on account under terms 4/10, n/30. The company returned $1,800 of merchandise to the supplier before payment was made. The liability was paid within the discount period. All of the merchandise purchased was sold for $18,600 cash. What effect will the return of merchandise to the supplier have on the accounting equation

Question

Business

Ronald Pratt

13 June, 10:00

Assume the perpetual inventory method is used. The company purchased $12,300 of merchandise on account under terms 4/10, n/30. The company returned $1,800 of merchandise to the supplier before payment was made. The liability was paid within the discount period. All of the merchandise purchased was sold for $18,600 cash. What effect will the return of merchandise to the supplier have on the accounting equation

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Eliezer Oconnor · Answer 1

The Assets and liabilities will be reduced by $1,800

Explanation:

The effect that the return of merchandise to the supplier we have is that The Assets and liabilities will be reduced by $1,800. This means that the purchase return will decrease assets of the merchandise inventory and decrease liabilities of accounts payable by the amount of $1,800, and the full amount of the invoiced merchandise will be returned.