Which of the following properly describes the impact on the

Which of the following properly describes the impact on the financial statements when a company borrows $21,000 from a local bank?

Liabilities increased $21,000.

Net income decreased $21,000.

Assets decreased $21,000.

Stockholders\' equity increased $21,000.

Solution

Correct answer is A.

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Borrowing from local bank is debt, which is recorded on the balance sheet on liability side.

So the asset will be increased by $21000, and the liabilities will also increase by same amount.

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Hope that helps.

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