A transaction completed by Norton Company caused a $4,000 increase in both the total assets and the total liabilities. This transaction could have been
A) purchase of office equipment for $12,000, paying $8,000 cash, with the rest on account.
B) investment by the owner of an additional $4,000.
C) purchase of office equipment, paying $4,000 cash, and $8,000 on account.
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

The transaction described in option A increases assets (office equipment) by $12,000 and increases liabilities (amount owed on account) by $4,000, while also decreasing another asset (cash) by $8,000. The net effect is an increase in assets and liabilities by $4,000, matching the scenario described.

A Transaction Completed by Norton Company Caused a $4,000 Increase