Assume the Perpetual Inventory Method Is Used

question 15

Multiple Choice

Assume the perpetual inventory method is used.
1) The company purchased $12,500 of merchandise on account under terms 2/10, n/30.
2) The company returned $1,200 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 $18,800 cash.
What effect will the return of merchandise to the supplier have on the accounting equation?"

• A) Assets and equity are reduced by $1,176.
• B) Assets and liabilities are reduced by $1,176.
• C) Assets and liabilities are reduced by $1,200.
• D) None. It is an asset exchange transaction.

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Definitions:

Foreign Visitors

Individuals from other countries who travel to a country for various purposes such as tourism, business, or education.

Ticket Prices

The cost charged for admission to an event or a journey.

Perfectly Price Discriminate

The practice of a seller charging the maximum possible price that each consumer is willing to pay for a product, rather than charging everyone the same price.

Societal Loss

The total loss in welfare or efficiency that occurs when market equilibrium is not achieved, often due to externalities, monopolies, or other market failures.