If a company has excess space in its building that it rents to another company for $700,what is the effect on the accounting equation when the first rent payment is collected?
A)Assets would decrease $700 and liabilities would decrease $700.
B)Assets would decrease $700 and equity would increase $700.
C)Assets would increase $700 and equity would decrease $700.
D)Assets would increase $700 and equity would increase $700.
E)Liabilities would decrease $700 and equity would increase $700.

Question

Quizplus · Accepted Answer

When the first rent payment is collected, there will be an increase in cash (asset) by $700. At the same time, there will be an increase in rental revenue (equity) by $700. Therefore, the accounting equation will be balanced with an increase of $700 in both assets and equity.

If a Company Has Excess Space in Its Building That