Effect on Accounting Equation Question

[luke_rulz94]

I don't know how the solutions got the answer to this, is it a mistake or am I missing something ?

Question 1
The following details relate to the Kelvin Clean KC2012 range of sunglasses.

Balance 1 August 4 @ $80
6 @ $85


Sales during August
24 August Credit sale to First Sight
7 K
C2012 @ $150, plus GST (Invoice 439)

Sales return during August
26 August Returned by First Sight
1 K
C2012 @ $150, plus GST (Credit note 80)


Purchases during August
10 August Credit purchase from Kelvin Clean
10 @ $90 plus GST (Invoice BG43)


Purchases returns during August
12 August Returned to Kelvin Clean
1 @ $90, plus GST (Credit note 19)


Physical stocktake on 31 August: 14 KC2012 on hand (Memo 56)



1.4 Identify the effect of the 26 August transaction on the accounting equation.



Solutions say :
Assets - Decrease 80
Liabilities - Decrease 15
Owners Equity - Decrease 65

I understand the Liabilities part, but how do Assets decrease by 80?

[BoredSatan]

OK im trying to figure out what you are trying to say because it is so messy that Im having to guess the information..

Remember for Sales Returns we use Reverse FIFO or LOFI (Last Our First In) so that the stock card can return to a position that makes it look like the sale never occured..

Because the last item sold was worth $85, therefore that would be the cost of the sunglasses to come back into the business regardless of what price they will be returned to the supplier at (because the purchase return price is determined by the supplier and we have no power over this).

Therefore

Assets: Debtors Control Decrease 165, Stock Control Increase 85, Total Decrease 80