Greencroft Company sold merchandise costing $1,800 for $2,600 cash. The merchandise was later returned by the customer for a refund. If the perpetual inventory method is used, what effect will the sales return have on the accounting equation?

Question

Quizplus · Accepted Answer

The sales return will increase assets (inventory) and decrease cost of goods sold, which will increase equity, by $1,800 each. It will also decrease assets (cash) and decrease sales revenue, which will decrease equity, by $2,600 each. The net effect is a decrease in total assets and total equity of $800.

Greencroft Company Sold Merchandise Costing $1,800 for $2,600 Cash