West Co.returned $500 of merchandise that was purchased on account.As a result of this transaction,assets will:
A) decreased and liabilities will decrease.
B) decreased and net income will decrease.
C) stay the same and net income will decrease.
D) stay the same and liabilities will decrease.

Question

Quizplus · Accepted Answer

When merchandise is returned on account, it means that the company had already paid out the money for the merchandise but is now receiving the money back due to the return. This means that their assets will decrease (since they no longer have the inventory) and their liabilities will decrease (since they no longer owe the money for the merchandise).

West CoReturned $500 of Merchandise That Was Purchased on Account