Alpha 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.

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Anthony Fermin · Accepted Answer

Final Answer : E, Explanation :  This transaction would result in an increase in assets (office equipment) of $75,000 and also an increase in liabilities (credit) of $75,000, resulting in no change in equity. Therefore, the accounting equation would be: $600,000 (original assets) + $75,000 (new office equipment) = $675,000 (total assets) = $250,000 (original liabilities) + $75,000 (new credit) = $325,000 (total liabilities) + $350,000 (original equity) = $350,000 (total equity).

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