Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system. 1) The company purchased $14,000 of merchandise on account under terms 2/10, n/30. 2) The company returned $3,500 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 $22,000 cash. What is the gross margin that results from these four transactions? Multiple Choice

a $7,840

b $11,780

c $8,000

d $11,710

B)

Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system.

1) The company purchased $14,000 of merchandise on account under terms 2/10, n/30.

2) The company returned $3,500 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 $22,000 cash.

What effect will the return of merchandise to the supplier in event (2) have on Darlingtons financial statements?

Multiple Choice

a Assets and stockholders equity decrease by $3,500.

b Assets and liabilities decrease by $3,430.

c Assets and liabilities decrease by $3,500.

d None. It is an asset exchange transaction.d