Assume Beta Company Uses the Perpetual Inventory Method and Engaged

question 99

Multiple Choice

Assume Beta Company uses the perpetual inventory method and engaged in the following transactions:
1) Purchased $5,000 of merchandise on account under terms 2/10, n/30.
2) Returned $600 (list price) of merchandise to the supplier before payment was made.
3) Paid the account payable within the discount period.
4) Sold the merchandise for $6,500 cash.
What effect does the return of merchandise to the supplier have on the accounting equation?

• A) Assets and equity are reduced by $600.
• B) Liabilities and assets are reduced by $600.
• C) Assets and liabilities are reduced by $588.
• D) Liabilities and equity are reduced by $600.

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