Questions: Question 25 3.33 Points The accounting equation for Kangaroo Enterprises is as follows: Assets = Liabilities + Stockholders' equity. 240,000 = 120,000 + 120,000 If the company now purchases office equipment on account for 20,000, the accounting equation will change to: (A) 260,000 = 140,000 + 120,000 (B) 240,000 = 120,000 + 120,000 (C) 260,000 = 132,000 + 128,000

The answer is (A) \$260,000 = \$140,000 + \$120,000

When Kangaroo Enterprises purchases office equipment on account for \$20,000, the following changes occur in the accounting equation:

1. Assets: The office equipment is an asset, so the total assets will increase by \$20,000.
2. Liabilities: Since the purchase is made on account, it means the company has not yet paid for the equipment, thus increasing the liabilities by \$20,000.
3. Stockholders' Equity: There is no immediate impact on stockholders' equity from this transaction.

Initially, the accounting equation is: \[ \text{Assets} = \text{Liabilities} + \text{Stockholders' Equity} \] \[ \$240,000 = \$120,000 + \$120,000 \]

After the purchase:

• Assets increase by \$20,000, making the new total \$260,000.
• Liabilities increase by \$20,000, making the new total \$140,000.
• Stockholders' Equity remains unchanged at \$120,000.

Thus, the new accounting equation is: \[ \$260,000 = \$140,000 + \$120,000 \]