If a company purchases equipment for $65,000 by issuing a note payable:
A)Total assets will increase by $65,000.
B)Total assets will decrease by $65,000.
C)Total assets will remain the same.
D)Total owners' equity will decrease.

Question

Quizplus · Accepted Answer

When a company purchases equipment by issuing a note payable, it increases its total assets by the amount of the equipment, in this case, $65,000. This creates a liability in the form of the note payable, but it does not affect total owners' equity. Therefore, the correct answer is A, Total assets will increase by $65,000.

If a Company Purchases Equipment for $65,000 by Issuing a Note