One Effect on the Accounting Equation When a Firm Borrows

question 81

Multiple Choice

One effect on the accounting equation when a firm borrows money is:

• A) Stockholders' equity decreases.
• B) Assets increase.
• C) Liabilities decrease.
• D) Assets decrease.

---

Definitions:

Process Costing

An accounting methodology used for homogenous products, where costs are assigned to mass-produced items over a set period.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, based on a planned amount of cost and activity.

Direct Materials

Raw materials that can be directly traced to the manufacturing process of a product and are considered a variable cost.

Mixing Department

A section within a manufacturing facility where materials are combined to produce a product, often part of the production line.