Assume the Perpetual inventory method is used.

1) The company purchased $13,800 of merchandise on account under terms 2/10, n/30.

2) The company returned $3,300 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 $21,600 cash.

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

A) Assets and equity are reduced by $3,300.

B) Assets and liabilities are reduced by $3,234.

C) Assets and Liabilities are reduced by $3,300.

D) None. it is an asset exchange transaction.