A Company Borrows $2 Million from Its Bank

question 125

Multiple Choice

A company borrows $2 million from its bank. It then uses this money to buy equipment. How does this transaction affect the accounting equation?

• A) Assets and Liabilities both rise $2 million.
• B) Assets and Stockholders' Equity both fall $2 million.
• C) Assets, Liabilities, and Stockholders' Equity are unchanged.
• D) Stockholders' Equity rises $2 million and Liabilities fall $2 million.

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