Question

If a company purchases equipment costing $4,500 on credit, the effect on the accounting equation would be: Assets increase $4,500 and liabilities decrease $4,500. Liabilities decrease $4,500 and assets increase $4,500. Equity decreases $4,500 and liabilities increase $4,500. Assets increase $4,500 and liabilities increase $4,500.

Answer 1

Answer: Assets increase $4,500 and liabilities increase $4,500.

Explanation:

Based on the information given in the question, since the company buys an equipment which is an asset to the company, then there will be an increase in the assets by $4500.

Also, in thus case, the equipment was gotten on credit which is a liability. Therefore, the liabilities will increase by $4500 as well.