A company borrows $2 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 $2 million.
B) Assets increase by $2 million and liabilities decrease by $2 million.
C) Assets increase by $4 million, liabilities increase by $2 million, and stockholders' equity increases by $2 million.
D) Assets remain unchanged and liabilities increase by $2 million.

Question

Quizplus · Accepted Answer

The company borrows $2 million, increasing liabilities, and uses the money to buy equipment, increasing assets by the same amount.

A Company Borrows $2 Million from Its Bank