Use this information to answer the following question. Here is the balance sheet for Costello Container Company:

-If the balance in the Cash account were used to pay part of Accounts Payable,then total liabilities and owner's equity would
A)decrease by $8,000.
B)increase by $8,000.
C)increase by $16,000.
D)decrease by $16,000.

Question

Use this information to answer the following question. Here is the balance sheet for Costello Container Company:

-If the balance in the Cash account were used to pay part of Accounts Payable,then total liabilities and owner's equity would
A)decrease by $8,000. 
B)increase by $8,000. 
C)increase by $16,000. 
D)decrease by $16,000.

Quizplus · Accepted Answer

Paying part of Accounts Payable with cash decreases both the asset (Cash) and the liability (Accounts Payable), with no effect on owner's equity, thus decreasing total liabilities and owner's equity by the payment amount.

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