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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Definitions:

Direct Materials Cost Variance

The difference between the actual cost of direct materials used in production and the standard cost of those materials.

Direct Materials Quantity Variance

The difference between the actual amount of direct materials used in production and the expected amount, based on standards, multiplied by the standard cost per unit.

Variable Costs

Expenses that fluctuate in direct proportion to the amount of production or sales, including items like labor and materials.

Fixed Costs

Expenses that don't change in total over a period, regardless of the level of output or sales.