Kirby,Inc.borrows $16 million from its bank.It then uses this money to buy equipment.How do these two transactions affect the company's accounting equation?
A)Assets and liabilities both increase by $16 million.
B)Assets increase by $8 million and liabilities decrease by $8 million.
C)Assets increase by $16 million,liabilities increase by $8 million,and stockholders' equity increases by $8 million.
D)Assets remain unchanged and liabilities increase by $16 million.

Question

Quizplus · Accepted Answer

The first transaction increases assets (Cash)and liabilities (Notes Payable).The second transaction increases assets (Equipment)and decreases an asset (Cash).The Cash account is increased and decreased by equal amounts.As such,taken together,these two transactions increase assets (Equipment)and increase liabilities (Notes Payable).

Kirby,IncBorrows $16 Million from Its Bank