Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. If an event increases one account and decreases another account equally within the same element (such as an asset exchange event), record I/D. If an event has no impact on the element, record NA. You do not need to enter amounts. Assume that Whetzel Company uses a perpetual inventory system.Increase = I Decrease = D Not Affected = NAWhetzel Company returned some defective merchandise it had previously purchased on account from a supplier,

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The Answer is

The purchase return decreases assets (merchandise inventory) and decreases liabilities (accounts payable). It does not affect the income statement or the statement of cash flows.

Indicate How Each Event Affects the Elements of Financial Statements