Retscan, Inc. has assets of $625,000, liabilities of $385,000, and equity of $240,000. It buys office equipment on credit for $125,000. The effects of this transaction include: Group of answer choices

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13-01-2021
Business

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Retscan, Inc. has assets of $625,000, liabilities of $385,000, and equity of $240,000. It buys office equipment on credit for $125,000. The effects of this transaction include: Group of answer choices

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Answer: a. Assets increase by $125,000 and liabilities increase by $125,000

Explanation:

The Office equipment bought are considered PPE which means they are fixed assets. Their acquisition will increase the assets held by the company by the value of the equipment, $125,000.

The equipment was however, bought on credit. This means that the company still owes the suppliers, payment for it which will see their liabilities increase by the same amount of $125,000.