Simpson Auto Body Repair purchased $20,000 of Machinery. The company paid $8,000 in cash at the time of the purchase and signed a promissory note for the remainder to be paid in four monthly installments. How will this transaction affect the accounting equation?
A) Increase Assets (Machinery $20,000 ) and decrease Liabilities (Accounts Payable $20,000)
B) Increase Total Assets by a net amount of $12,000 (increase Machinery $20,000 and decrease Cash $8,000 ) and increase Liabilities (Notes Payable $12,000)
C) Increase Total Assets by a net amount of $20,000 (increase Machinery $12,000 and increase Cash $8,000 ) and decrease Liabilities (Accounts Payable $20,000)
D) Increase Assets (Machinery $12,000 ) and increase Liabilities (Accounts Payable $12,000)
B
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What will be an ideal response?
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