Touch Tronix, Inc.sells component parts to Advanced Communications, Inc.a cell phone manufacturer.During December 10, 2011, Touch Tronix, Inc.sold €680,000 of goods to Advanced Communications, Inc.on account for €880,000.Advanced Communications, Inc.was dissatisfied with 25% of the merchandise it receives due to inferior quality.On December 21, 2011, Advanced Communications, Inc.returns the goods to Touch Tronix, Inc.for credit.Which of the following is true regarding the statement of financial position and the income statement for Touch Tronix, Inc.at December 31, 2011?

Question

Quizplus · Accepted Answer

The correct answer is A because the return of goods will decrease both assets and income by the amount of the returned goods, which is €170,000 (25% of €680,000).