Question

What is the impact on the Accounting Equation when Rosemary buys $1,200 furniture from some dude in the C-Store Parking lot (legit right?)?

a) Assets decrease; Liabilities decrease
b) Assets increase; Owner's equity decreases
c) Assets increase; Liabilities increase
d) Liabilities decrease; Owner's equity increases

Answer 1

When Rosemary buys $1,200 furniture, the impact on the Accounting Equation is that the Assets will decrease and the Liabilities will not change. Therefore, the correct option in this case is a) Assets decrease; Liabilities decrease.

Step-by-step explanation:

The impact on the Accounting Equation when Rosemary buys $1,200 furniture from someone in the C-Store Parking lot is that the Assets will decrease, specifically the furniture as it is an asset. This is because Rosemary is spending money to acquire the furniture, which is considered a decrease in assets. However, since the transaction is not financed through a loan or liability, there will be no change in Liabilities. Additionally, the transaction does not involve any changes in Owner's Equity.

Therefore, the correct option in this case is a) Assets decrease; Liabilities decrease.