Explain How the Following General Journal Entry Affects the Accounting

question 128

Multiple Choice

Explain how the following general journal entry affects the accounting equation.

• A)Both assets and equity increase.
• B)Both liabilities and assets increase.
• C)Assets increase and equity decreases.
• D)Liabilities increase and equity decreases.

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Definitions:

Expected Inflation Rate

The predicted average rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.

Market Risk Premium

The additional return that investors demand for holding a risky market portfolio instead of risk-free assets.

Required Rate Of Return

The required rate of return is the minimum annual percentage earned by an investment that will induce individuals or companies to put money into a particular security or project.

Market Risk Premium

The extra yield an investor anticipates earning by choosing a volatile market portfolio over secure, risk-free investments.