Alpha Company Has Assets of $600,000, Liabilities of $250,000, and Equity

question 39

Multiple Choice

Alpha Company has assets of $600,000, liabilities of $250,000, and equity of $350,000. It buys office equipment on credit for $75,000. What would be the effects of this transaction on the accounting equation?

• A) Assets increase by $75,000 and liabilities increase by $75,000.
• B) Liabilities increase by $75,000 and expenses decrease by $75,000.
• C) Assets increase by $75,000 and expenses decrease by $75,000.
• D) Assets increase by $75,000 and expenses increase by $75,000.
• E) Assets decrease by $75,000 and expenses decrease by $75,000.

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Definitions:

Traceable Fixed Advertising

Fixed advertising costs that can be directly linked to a specific product, segment, or area of the business.

Contribution Margin

The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and generate profit.

Fixed Manufacturing Overhead

The set costs associated with operating a manufacturing facility that do not vary with the level of production, including salaries of managers and depreciation of equipment.

Unit Product Cost

The total cost (both fixed and variable) associated with producing a single unit of a product.