How does the payment of rent for equipment affect the accounting equation? a

Finance Jan 16, 2021

How does the payment of rent for equipment affect the accounting equation? a. assets increase; assets decrease b. assets decrease; stockholders' equity decreases c. assets decrease; liabilities increase d. assets increase: stockholders' eauitv increases

Expert Solution

As we know that

Total Assets = Total Liabilities + Total Stockholders Equity

When the company pay for rent, it reduces its cash and cash is an asset. So, asset side will reduce. It decrease shareholders' equity due to a decrease in income, rent expenses decrease income.

So, the payment of rent for equipment decrease assets and stockholders' equity.

Correct option is "B".

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