Question

On June 1, Banner Corporation purchased an estimated four months’ worth of office supplies on account from Acme Office Equipment for $3,200. What effect would this transaction have on Banner’s books? A : It would increase the asset Supplies by $3,200 and increase the liability Accounts Payable by $3,200. B : It would increase the asset Supplies by $3,200 and decrease the liability Accounts Payable by $3,200. C : It would decrease the asset Supplies by $3,200 and increase the liability Accounts Payable by $3,200. D : It would decrease the asset Supplies by $3,200 and decrease the liability Accounts Payable by $3,200.

Answer 1

Answer:

A : It would increase the asset Supplies by $3,200 and increase the liability Accounts Payable by $3,200.

Explanation:

The supplies are an assets, it will be used to operate the business and generate cashflow. As we are purchasing them, it will increase

These supplies are purchases on account, which means are not paid, so the comapny take a debt to acquire this assets.

So, liability will icnrease by the same amount of assets.