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Assume the perpetual inventory method is used. 1) The company purchased $13,800 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,300 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 $21,600 cash. What effect will the return of merchandise to the supplier have on the accounting equation?

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Answer:

Assets and liabilities are reduced by $3,300.

Explanation:

The effect that the return of merchandise to the supplier have on the accounting equation is that Assets and liabilities are reduced by $3,300 because the purchase return will decrease assets or reduced the assets which is the merchandise inventory and decrease liabilities or reduced the liabilities which is accounts payable by $3,300 which is said to be the full invoiced amount of the merchandise returned.

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