Cody and Rio run a successful business that sells premium bird cages to retail stores. One client, Rich Inc., calls Cody and exclaims that a bird cage they purchased last week was the wrong colour. Rich Inc. says they will return the bird cage unless Cody offers them a 20% allowance on the cage. Cody agrees to the allowance. How does Rich Inc. record this allowance? Assume a perpetual inventory system.

Select one:

a.It should decrease a liability and decrease an asset

b.It should decrease a liability and increase an asset

c.It should increase a liability and decrease an asset

d.It should increase a liability and increase an asset