The acquisition of inventory on account will ________.
A) increase assets and decrease stockholders' equity
B) decrease assets and decrease liabilities
C) increase assets and increase liabilities
D) increase assets and increase stockholders' equity

Question

Quizplus · Accepted Answer

When inventory is purchased on account (i.e. bought on credit), the company's assets (inventory) increases, but so does its liabilities (accounts payable) because it owes money to the supplier. Therefore, both assets and liabilities increase, but there is no impact on stockholders' equity until the inventory is sold.

The Acquisition of Inventory on Account Will ________