Saddleback Company Paid Off $30,000 of Its Accounts Payable in Cash

question 109

Multiple Choice

Saddleback Company paid off $30,000 of its accounts payable in cash. What would be the effects of this transaction on the accounting equation?

• A)Assets, $30,000 increase; equity, $30,000 increase.
• B)Assets, $30,000 decrease; liabilities, $30,000 decrease.
• C)Assets, $30,000 decrease; liabilities, $30,000 increase.
• D)Liabilities, $30,000 decrease; equity, $30,000 increase.
• E)Assets, $30,000 decrease; equity $30,000 decreasE.Assets = Liabilities + Stockholders' Equity

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Definitions:

Shareholders

Individuals or entities that own one or more shares of stock in a public or private corporation, thus having a claim to a part of the company's assets and earnings.

Risk

The possibility of loss or injury, or the variability of returns associated with a given investment or financial activity.

Contributed Capital

The total value of cash or other assets that shareholders have given a company in exchange for stock, also known as paid-in capital.

Return on Assets

A financial ratio indicating the profitability of a company relative to its total assets, measuring how effectively a company uses its assets to generate earnings.