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Zion Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?
a. Assets increase by $75,000 and expenses increase by $75,000.
b. Assets increase by $75,000 and expenses decrease by $75,000.
c. Liabilities increase by $75,000 and expenses decrease by $75,000.
d. Assets decrease by $75,000 and expenses decrease by $75,000.
e. Assets increase by $75,000 and liabilities increase by $75,000.

Respuesta :

Answer:

e. Assets increase by $75,000 and liabilities increase by $75,000.

Explanation:

The purchase of the asset (office equipment) on credit would result in the following entries;

Debit Office equipment    $75,000

Credit Creditor                  $75,000

Being entries to recognize the purchase of office equipment on credit.

As such, asset increases by $75,000 while liabilities also increase by the same amount.

Option e.

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