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[The following information applies to the questions displayed below.] Darlington Company entered into the following business events during its first month of operations. The company uses the perpetual inventory system.

1. 1) The company purchased $12,100 of merchandise on account under terms 3/10, n/30.
2. 2) The company returned $1,600 of merchandise to the supplier before payment was made.
3. 3) The liability was paid within the discount period.
4. 4) All of the merchandise purchased was sold for $18,200 cash.

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

A. Assets and stockholders equity decrease by $1,600.

B. Assets and liabilities decrease by $1,552.

C.Assets and liabilities decrease by $1,600.

D. None. It is an asset exchange transaction.

2. What is the gross margin that results from these four transactions?

A. 8,015

B. 6,100

C. 5,917

D. 8,063

3. What is the net cash flow from operating activities as a result of the four transactions?

1. 9,015

B. 5,917

C. 8,063

D. 6,100