Which of the following properly describes the impact on the financial statements when a company borrows $20,000 from a
Posted: Sat Aug 07, 2021 6:56 am
Which of the following properly describes the impact on the financial statements when a
company borrows $20,000 from a local bank?
A) Net income increases $20,000.
B) Assets decrease $20,000.
C) Stockholders' equity increases $20,000.
D) Liabilities increase $20,000.
Answer: D
Explanation: The amount borrowed needs to be repaid, and the local bank is a creditor;
therefore, liabilities are increased by the amount of the loan.
company borrows $20,000 from a local bank?
A) Net income increases $20,000.
B) Assets decrease $20,000.
C) Stockholders' equity increases $20,000.
D) Liabilities increase $20,000.
Answer: D
Explanation: The amount borrowed needs to be repaid, and the local bank is a creditor;
therefore, liabilities are increased by the amount of the loan.