Chapter 1, Problem 4MCQ

Brunswick borrows $ 50,000 cash from Third National Bank. How does this transaction affect the accounting equation for Brunswick?

1. Assets increase by $50,000: liabilities increase by $ 50,000: no effect on equity.
2. Assets increase by $ 50,000: no effect on liabilities: equity increases by $ 50,000.
3. Assets increase by $ 50,000: liabilities decrease by $ 50,000: no effect on equity.
4. No effect on assets: liabilities increases by $ 50,000: equity increases by $50,000.
5. No effect on assets: liabilities increases by $ 50,000: equity decreases by $50,000.