Question

Clayton Company purchased a new coffee maker in the amount of $3,500. Clayton paid $1,000 down and will pay the remainder in 60 days. What effect does this transaction have on the accounting equation?

a.$3,500 net increase in assets and $2,500 increase in liabilities
b.$2,500 net increase in assets and $2,500 increase in liabilities
c.$3,500 net increase in assets and $3,500 increase in liabilities
d.$1,000 net decrease in assets and $1,000 decrease in liabilities

Answer 1

option B

Explanation:

the correct answer is option B

given,

cost of coffee maker = $3,500

Clayton paid down = $1,000

so, this transaction have

increase in assets of = $3500 - $ 1000

= $ 2500

Also increase in liability of = $ 2500

Liability is what the company from the other parties.

total asset means the sum of total liability and the equity.