Question

Morreale Beaver Company buys a $12,000 van on credit. This transaction will affect the:

Select one:
a. income statement only.
b. income statement and retained earnings statement only.
c. balance sheet only.
d. income statement, retained earnings statement, and balance sheet.

Answer 1

The purchase of a van on credit by Morreale Beaver Company affects only the balance sheet, as it increases both assets and liabilities correspondingly, but does not immediately impact the income statement or retained earnings statement.

Step-by-step explanation:

Morreale Beaver Company's purchase of a $12,000 van on credit is a transaction that directly impacts the company's balance sheet only. Purchasing an asset like a van on credit means the company's assets increase because they now have the van, and at the same time, liabilities also increase due to the amount of credit they need to repay.

The income statement is involved only when recording expenses or revenues, not when purchasing assets on credit. The retained earnings statement would only be impacted by this transaction through future depreciation expenses or if the van is sold for a gain or loss in the future, none of which is immediately relevant to the transaction of purchasing the van on credit.

Therefore, the correct answer is: c. balance sheet only.