A company incurred $30,000 (to be paid next year) for the current year's advertising activities. What would the effect of this transaction on the current year's accounting equation?
A) No effect on Assets; $30,000 decrease in Liabilities; $30,000 increase in Stockholders' Equity
B) $30,000 increase in Assets; $30,000 increase in Liabilities; No effect on Stockholders' Equity
C) $30,000 increase in Assets; No effect on Liabilities; $30,000 increase in Stockholders' Equity
D) No effect on Assets; $30,000 increase in Liabilities; $30,000 decrease in Stockholders' Equity

Question

Quizplus · Accepted Answer

The transaction increases liabilities (since the payment is deferred to next year, creating a payable) and decreases stockholders' equity (as expenses reduce equity) without immediately affecting assets.

A Company Incurred $30,000 (To Be Paid Next Year) for the Current