Question

Ocean Breeze Co. paid $500 cash for expenses related to advertising for the period. Which of the following shows how this event will affect the company’s accounting equation? The letters ""NA"" indicate that the component of the equation is not affected.

Answer 1

Answer:

($500) = NA + NA + ($500)

Explanation:

In this question, the following accounting equation is used

Assets = Liability + common stock + retained earnings

As in the transaction, it is given that $500 cash is paid for advertising expense, so this event would be affecting the accounting equation for asset and the retained earning account i.e

($500) = NA + NA + ($500)

As cash is paid which reduces the asset balance plus the retained earning balance is also get reduced by $500