When equipment is purchased on credit,
A)assets increase and liabilities decrease.
B)assets and owner's equity increase.
C)assets and expenses increase.
D)assets and liabilities increase.

Question

Quizplus · Accepted Answer

When equipment is purchased on credit, assets increase because the company now owns the equipment. However, liabilities also increase as the company now owes money to the creditor who provided the credit to purchase the equipment. Therefore, the best choice is D - assets and liabilities increase.

When Equipment Is Purchased on Credit