Land is purchased on credit.For this transaction, identify the effect on the accounting equation.
A)Assets increase and liabilities increase.
B)Assets increase and owners' equity increases.
C)Liabilities increase and owners' equity decreases.
D)Liabilities decrease and assets decrease.

Question

Quizplus · Accepted Answer

When land is purchased on credit, the assets (land) increase, as well as the liabilities (the amount owed on the credit). Therefore, the answer is choice A, Assets increase and liabilities increase.

Land Is Purchased on Credit