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 Company granted a $70 allowance to a customer who was not totally satisfied with the quality of goods received. The customer did not return the goods and had not yet paid for them.AssetsLiabilitiesStk. EquityRevenuesExpensesNet IncomeStmt of Cash Flows???????
What will be an ideal response?
(D) (NA) (D) (D) (NA) (D) (NA)
Granting a sales allowance to a customer decreases assets (accounts receivable) and decreases stockholders' equity (retained earnings). It also decreases revenue and net income. It does not affect the statement of cash flows.
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