A transaction completed by Norton Company caused a $10,000 increase in both the total assets and the total liabilities. This transaction could have been:
A) purchase of office equipment for $16,000, paying $6,000 cash, with the rest on account.
B) investment by the owner of an additional $10,000.
C) purchase of office equipment, paying $10,000 cash, and $6,000 on account.
D) a loan of $2,000, on a $12,000 purchase of equipment with $10,000 down payment.

Question

Quizplus · Accepted Answer

The transaction described in choice A increases assets (office equipment) by $16,000 and increases liabilities (amount owed on account) by $10,000, while also decreasing another asset (cash) by $6,000. The net effect is an increase in assets by $10,000 (the $16,000 equipment minus the $6,000 cash) and an increase in liabilities by $10,000, matching the scenario described.

A Transaction Completed by Norton Company Caused a $10,000 Increase