Question

Country Homes Corporation just recorded a transaction in its books. If this transaction increased the total liabilities by $10,000, then ________. Select one: A. assets must decrease by $10,000 B. assets must increase, or equity must decrease by $10,000 C. either assets or equity must decrease by $10,000 D. both assets and equity must each decrease by $5,000

Answer 1

Answer:

B. assets must increase, or equity must decrease by $10,000

Explanation:

As it is given that

The transaction increased the total liabilities by $10,000 which either increase the assets or decrease the equity by $10,000 as per the accounting equation

As we know that

Accounting equation is

Total assets = Total liabilities + owner equity

So by following this equation the appropriate answer is B as the transaction focused on balancing the accounting equation