Purchase of machinery for cash:Question 3Answera.Increases total assetsb.Increases assets and liabilitiesc.Keeps total assets unchangedd.Decreases total assets
Question
Solution 1
The correct answer is c. Keeps total assets unchanged.
Here's why:
When a company purchases machinery for cash, it is essentially converting one type of asset (cash) into another type (machinery). The cash account decreases while the machinery (or equipment) account increases.
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