If a company has excess space in its building that it rents to another company for $700,what is the effect on the accounting equation during the first month?
A)Assets would decrease $700 and liabilities would decrease $700.
B)Assets would decrease $700 and equity would increase $700.
C)Assets would increase $700 and equity would decrease $700.
D)Assets would increase $700 and equity would increase $700.
E)Liabilities would decrease $700 and equity would increase $700.

Question

Quizplus · Accepted Answer

Rent received is a revenue for the company, which increases assets (cash or accounts receivable) and equity (retained earnings). Therefore, the accounting equation would increase by $700 in both assets and equity.

If a Company Has Excess Space in Its Building That