Assume the perpetual inventory method is used. 1) The company purchased $13,300 of merchandise on account under terms 2/10, n/30. 2) The company returned $2,800 of merchandise to the supplier before payment was made. 3) The liability was paid within the discount period. 4) All of the merchandise purchased was sold for $20,600 cash.

What effect will the return of merchandise to the supplier have on the accounting equation?

Assets and liabilities are reduced by $2,800.

Assets and liabilities are reduced by $2,744.

Assets and equity are reduced by $2,800.

None. It is an asset exchange transaction.

The amount of gross margin from the four transactions is:

$10,310.

$10,366.

$7,300.

$7,154.

The net cash flow from operating activities as a result of the four transactions is:

$10,366.

$7,154.

$7,300.

$10,310.