Questions: Question 3 If expenses are paid in cash, then liabilities will decrease. stockholders' equity will increase. assets will increase. assets will decrease.

The answer is the last one: assets will decrease.

Explanation for each option:

1. Liabilities will decrease: This is incorrect. Paying expenses in cash does not directly affect liabilities. Liabilities are obligations the company owes to others, and paying expenses typically involves using cash or other assets, not reducing liabilities.

2. Stockholders' equity will increase: This is incorrect. Paying expenses in cash reduces the company's assets without directly affecting stockholders' equity. In fact, expenses reduce net income, which can ultimately reduce retained earnings, a component of stockholders' equity.

3. Assets will increase: This is incorrect. Paying expenses in cash means that the company is using its cash (an asset) to settle those expenses. Therefore, the company's assets will decrease, not increase.

4. Assets will decrease: This is correct. When expenses are paid in cash, the company uses its cash (an asset) to pay for those expenses, resulting in a decrease in the total assets.

Summary: When expenses are paid in cash, the company's assets will decrease.