Final answer:
When a payment is made within the discount period for goods previously purchased on account, the company's total assets decrease as a result of the cash outflow being greater than the reduction in accounts payable due to the discount.
Step-by-step explanation:
This happens because when the company pays off its accounts payable within the discount period, two things happen: it reduces its liabilities (accounts payable) for the amount owed and reduces its assets (cash) for the amount paid.
The payment amount will be less than the initial liability due to the taken discount, but it will still result in a net decrease in total assets.The journal entry to record the payment within the discount period for goods previously purchased on account causes total assets to decrease.
When a payment is made within the discount period, the amount paid is less than the original amount owed. This means that the accounts payable (liability) on the balance sheet decreases, resulting in a decrease in total assets. The decrease in accounts payable is balanced by a decrease in cash, which is also an asset.
The journal entry to record the payment within the discount period for goods previously purchased on account will cause total assets to decrease (option C).