question 7 2.5 pts if a company has excess space in its building that it rents to another company for $700…

question 7 2.5 pts if a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation during the first month? assets would decrease $700 and liabilities would decrease $700. liabilities would decrease $700 and equity would increase $700. assets would decrease $700 and equity would increase $700. assets would increase $700 and equity would increase $700. assets would increase $700 and equity would decrease $700.

question 7 2.5 pts if a company has excess space in its building that it rents to another company for $700, what is the effect on the accounting equation during the first month? assets would decrease $700 and liabilities would decrease $700. liabilities would decrease $700 and equity would increase $700. assets would decrease $700 and equity would increase $700. assets would increase $700 and equity would increase $700. assets would increase $700 and equity would decrease $700.

Answer

Explanation:

Step1: Analyze the transaction

The company rents out excess space for $700. This is an income - generating activity. Rent income is an equity item (revenue increases equity), and since the company receives cash (an asset) for the rent, an asset (cash) also increases.

Step2: Apply accounting equation principles

The accounting equation is Assets = Liabilities + Equity. When the company receives $700 in rent, assets increase by $700 (cash received) and equity increases by $700 (due to rent revenue).

Answer:

Assets would increase $700 and equity would increase $700.