If a company purchases equipment for $65,000 by issuing a note payable:
A) Total assets will increase by $65,000.
B) Total assets will decrease by $65,000.
C) Total assets will remain the same.
D) The company's total equity will decrease.

Question

Quizplus · Accepted Answer

When a company purchases equipment by issuing a note payable, it means that they are receiving the equipment (which is an asset) and also creating a liability (the note payable). Therefore, the total assets will increase by the amount of the equipment purchased, which in this case is $65,000.

If a Company Purchases Equipment for $65,000 by Issuing a Note