The Davis Company purchases a new delivery truck by making a 10% cash down payment and signing a note payable for the balance. How will assets, liabilities and owner’s equity be affected by this transaction?Question 4Select one:a.Assets - decreaseLiabilities - IncreaseOwners' Equity - No Chargeb.Assets - increaseLiabilities - increaseOwners Equity - no change c.Assets - increaseLiabilities - decreaseOwners' Equity - increased.Assets - no changeLiabilities - increaseOwners' Equity - decrease

The correct answer is b. Assets - increase, Liabilities - increase, Owners Equity - no change.

Here's why:

1. Assets increase: The delivery truck is a new asset for the Davis Company. Even though they made a 10% down payment, the entire value of the truck is considered an asset.

2. Liabilities increase: The note payable for the balance of the truck's cost is a liability. The company is obligated to pay this amount in the future.

3. Owners Equity no change: The owners' equity doesn't change because the increase in assets is offset by the increase in liabilities. The net effect on the owners' equity is zero.

The correct answer is b. Assets - increase, Liabilities - increase, Owners Equity - no change.

Here's why:

1. Assets Increase: The delivery truck is a new asset for the Davis Company. Even though they made a 10% down payment, the entire value of the truck is considered an asset.

2. Liabilities Increase: The company signed a note payable for the balance of the truck's cost. This note payable is a liability because it's money the company owes.

3. Owners Equity No Change: The owners' equity doesn't change because the company didn't issue new shares or pay dividends. The transaction only involved assets (the truck) and liabilities (the note payable).

The correct answer is b. Assets - increase, Liabilities - increase, Owners Equity - no change.

Here's why:

1. Assets Increase: The company purchases a new delivery truck, which is considered an asset. Even though they made a 10% down payment, the truck itself is worth more than that, so the total assets increase.

2. Liabilities Increase: The company signed a note payable for the balance of the truck's cost. This note payable is a liability because it's money the company owes. So, liabilities increase.

3. Owners Equity No Change: The owner's equity doesn't change in this transaction. The company used its existing resources (cash for the down payment and taking on debt for the balance) to acquire the truck. There was no additional investment or withdrawal by the owner, so the owner's equity remains the same.