Galaxy Company sold merchandise costing $1,700 for $2,600 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

a) Total assets and total equity decrease by $900.

b) Total assets decrease by $2,600 and total equity is decreased by $1,700.

c) Total assets and total equity decrease by $2,600.

d) Total assets and total equity increase by $900.

Question

Mathematics

Aron Olson

2 April, 22:00

Galaxy Company sold merchandise costing $1,700 for $2,600 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

a) Total assets and total equity decrease by $900.

b) Total assets decrease by $2,600 and total equity is decreased by $1,700.

c) Total assets and total equity decrease by $2,600.

d) Total assets and total equity increase by $900.

+4

Answers (1)

Know the Answer?

Abigayle Booth · Answer 1

a) Total assets and total equity decrease by $900.

Step-by-step explanation:

The perpetual inventory method records the selling or purchasing of inventory immediately when it occurs and provides high detail.