In part,a transaction affects the accounting equation by decreasing an asset.There is no effect on liabilities.Which of the following statements is correct with regards to this transaction?
A) If other assets are unchanged, stockholders' equity must be increasing.
B) If other assets are unchanged, stockholders' equity must be decreasing.
C) If stockholders' equity is unchanged, another asset must be decreasing.
D) If stockholders' equity is unchanged, other assets must be unchanged.

Question

Quizplus · Accepted Answer

Since the transaction decreased an asset and there is no effect on liabilities, the accounting equation can only balance by decreasing stockholders' equity. Therefore, if other assets are unchanged, stockholders' equity must be decreasing.

In Part,a Transaction Affects the Accounting Equation by Decreasing an Asset.There