A Company Borrows $2 Million from Its Bank

question 59

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 Shareholders' Equity both fall $2 million.
• C)Assets,Liabilities,and Shareholders' Equity are unchanged.
• D)Shareholders' Equity rises $2 million and Liabilities fall $2 million.

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Definitions:

Driveway

A private road leading from a public way to a building on the adjoining land, primarily used for vehicle access.

Profit

The right to go onto someone’s land and take part of the land or a product of it away from the land.

Apples

A type of fruit that is grown worldwide and comes in various colors, such as red, green, and yellow, known for its sweet taste and nutritious value.

Option Contract

An agreement whereby the offeree gives the offeror a piece of consideration in exchange for the offeror’s agreement to hold the offer open for a specified period of time.