Asked by Ninh Thi Thuy Trang on Jul 05, 2024
Verified
Billington Corp borrows $80,000 cash from Second National Bank.How does this transaction affect the accounting equation for Billington?
A) Assets would decrease $80,000 and liabilities would decrease $80,000.
B) Assets would decrease $80,000 and equity would increase $80,000.
C) Assets would increase $80,000 and equity would decrease $80,000.
D) Assets would increase $80,000 and liabilities would increase $80,000.
E) Liabilities would decrease $80,000 and equity would increase $80,000.
Accounting Equation
The fundamental principle of accounting stating that Assets = Liabilities + Equity.
- Explore the implications of transactions on the accounting equation.
Verified Answer
OM
Oshante MckeithanJul 08, 2024
Final Answer :
D
Explanation :
Borrowing $80,000 from Second National Bank would increase the assets of Billington by $80,000 (cash) and the liabilities by $80,000 (loan payable). Thus, the accounting equation would be:
Assets (+) $80,000 = Liabilities (+) $80,000 + Equity (0)
Assets (+) $80,000 = Liabilities (+) $80,000 + Equity (0)
Learning Objectives
- Explore the implications of transactions on the accounting equation.
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