Question

Select whether the transaction increases or decreases assets, liabilities, and stockholders' equity. Leave blank if no effect.

1) Increases assets, liabilities, and stockholders' equity
2) Decreases assets, liabilities, and stockholders' equity
3) Increases assets and stockholders' equity, decreases liabilities
4) Decreases assets and stockholders' equity, increases liabilities

Answer 1

The transaction increases assets and stockholders' equity, and decreases liabilities.

Step-by-step explanation:

The correct answer is 3) Increases assets and stockholders' equity, decreases liabilities.

When a transaction increases assets, it means that there is a positive impact on the resources owned by the company. When a transaction increases liabilities, it means that there is a positive impact on the company's debts or obligations. When a transaction increases stockholders' equity, it means that there is a positive impact on the owners' investment in the company.

Therefore, option 3) best represents the transaction as it increases assets and stockholders' equity, while decreasing liabilities.