Alpha Company has assets of $608,000, liabilities of $254,000, and equity of $354,000. It buys office equipment on credit for $79,000. What would be the effects of this transaction on the accounting equation?

Alpha Company has assets of $608,000, liabilities of $254,000, and equity of $354,000. It buys office equipment on credit for $79,000. What would be the effects of this transaction on the accounting equation?

Assets increase by $79,000 and expenses increase by $79,000.

Assets increase by $79,000 and expenses decrease by $79,000.

Liabilities increase by $79,000 and expenses decrease by $79,000.

Assets decrease by $79,000 and expenses decrease by $79,000.

Assets increase by $79,000 and liabilities increase by $79,000.

Explanation

Assets = Liabilities + Owner's Equity
$608,000 = $254,000 + $354,000
Assets increase by $79,000 (Equipment) due to the purchase.
Liabilities also increase by $79,000 (Accounts Payable) due to the purchase on credit.