Question

Li Company paid to purchase land. As a result of this accounting event:

A. Assets increase, liabilities decrease
B. Assets decrease, liabilities increase
C. Assets increase, liabilities increase
D. Assets decrease, liabilities decrease

Answer 1

The Li Company's purchase of land would result in one asset increasing (land), while another asset decreases (cash), with no mention of liabilities changing.

Step-by-step explanation:

When the Li Company paid to purchase land, this accounting event represents an exchange transaction. It would lead to an increase in one asset (land) and a decrease in another asset (cash or cash equivalents). Therefore, the correct answer is: assets decrease, liabilities decrease. This happens because the company is exchanging one asset for another, and there's usually no change in liabilities unless the land is purchased through debt financing, which is not mentioned in the context of this question.