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    Effect of Increase in Liability on Business

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    Total Liabilities increase by $7,000. How is the accounting equation affected? answer A, B, C or D.

    a) Assets must have increased by $7,000 or owner's equity must have decreased by $7,000
    b) Assets must have decreased by $7,000
    c) Assets and owner's equity must have each decreased by $3,500
    d) Owner's equity must have increased by $7,000

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    Solution Summary

    The solution provide example of the effect of increase in liability in business.