Patterson Company purchases store supplies for $1,500, paying 20% of the amount
ID: 2417632 • Letter: P
Question
Patterson Company purchases store supplies for $1,500, paying 20% of the amount due in cash and agreeing to pay the balance at a later date. What is the effect of this transaction on individual asset accounts, individual liability accounts, the Capital Stock account, and the Retained Earnings account?
Check all that apply
- An asset account increases
- A liability account increases
- Capital Stock increases
- Retained Earnings increases
- An asset account decreases
- A liability account decreases
- Capital Stock decreases
- Retained earnings decrease
Explanation / Answer
Supplies (asset ) Increase by 1500
Cash (asset )decrease by 300 [1500*.20=300]
Accounts payable (liability ) increase by 1200 [1500-300 =1200]
Correct option are :
An asset account increase by 1500
An asset account decreases by 300
An liability account increases by 1200
**Net effect of transaction on asset side is that ,asset side increases by 1200 [1500-300 = 1200]