Galaxy Company sold merchandise costing $2,400 for $3,800 cash. The merchandise was later returned by the customer for a refund. The company uses the perpetual inventory system. What effect will the sales return have on the financial statements? (Consider the effects of both parts of this event.)

Total assets decrease by $3,800 and total stockholders' equity decreases by $2,400. Total assets and total stockholders' equity increase by $1,400.

Total assets and total stockholders' equity decrease by $1,400.

Total assets and total stockholders' equity decrease by $3,800.

None of the above.

why is it the answer?