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. You do not need to enter amounts. Assume that Frank Company uses a perpetual inventory system.Increase = I Decrease = D No Effect = NA(Note that "No Effect" means that the event does not effect that element of the financial statements or that the event causes an increase in that element that is offset by a decrease in that same element.) Wetzel Co. returned some defective merchandise it had previously purchased on account from a supplier, Jacobs Company. Jacobs Company agreed to credit Wetzel's account.AssetsLiabilitiesStk. EquityRevenuesExpensesNet IncomeStmt of Cash Flows???????
What will be an ideal response?
(D) (D) (NA) (NA) (NA) (NA) (NA)
The purchase return decreases assets (merchandise inventory) and decreases liabilities (accounts payable). Because product costs are expensed when inventory is sold, not when the goods are purchased, the event does not affect net income.
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