Ramirez Company returns merchandise previously purchased on account. It had not yet been paid for. Ramirez uses the perpetual inventory system. Which of the following answers reflects the effects on the financial statements of only the purchase return?

Question

Quizplus · Accepted Answer

The purchase return will reduce Ryland's assets (inventory) and liabilities (accounts payable). It will not affect the income statement or the statement of cash flows.

Ramirez Company Returns Merchandise Previously Purchased on Account