If a Transaction Increased an Asset of a Business

question 15

Multiple Choice

If a transaction increased an asset of a business. Which of the following can be an effect of the transaction for the accounting equation to balance?

• A)There is an equal decrease in another asset.
• B)There is an equal decrease in equity.
• C)There is an equal decrease in a liability account.
• D)Both liabilities and equity decreases.

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Definitions:

Equity Method

This involves documenting investments when the investor holds substantial influence over the entity being invested in, without having total control.

Goodwill

An intangible asset that arises when a buyer acquires an existing business, representing the premium paid over the fair market value of the net identifiable assets.

Retrospectively Apply

The action of applying a new accounting policy to transactions, other events, and conditions as if that policy had always been applied.