Question

Alpha Company has assets of $618.,000, liabilities of $259,000, and equity of $359,000. It buys office equipment on credit for $84,000. What would be the effects of this transaction on the accounting equation?

a. Assets increase by $84,000 and abilties increase by $84,000
b. Assets increase by $84000 and expenses increase by $84.000
c. Labities innease by $84.000 and expenses decrease by $84,000
d. Assets decrease b $84,000 and expeses decrease by $84.000
e. Assets increane by 584,000 and expenses decreane by $84,000

Answer 1

In summary, when Alpha Company buys office equipment on credit, both assets and liabilities increase by $84,000, maintaining balance in the accounting equation without altering the company's equity.

Step-by-step explanation:

The correct response to Alpha Company buying office equipment on credit for $84,000 is that assets increase by $84,000 and liabilities increase by $84,000. This transaction affects the accounting equation by adding the value of the office equipment to the company's assets while simultaneously increasing the company's liabilities, as the equipment was bought on credit.

Therefore, the accounting equation remains balanced with the equation: Assets = Liabilities + Equity. Considering the provided numbers: before the transaction assets were $618,000 and liabilities were $259,000; after purchasing the equipment on credit, assets become $618,000 + $84,000, and liabilities become $259,000 + $84,000, thereby the equity remains unchanged.

ssets increase by $84,000, and liabilities increase by $84,000, keeping the balance in the accounting equation consistent.