Chavez Co.'s salaried employees earn four weeks' vacation per year. Chavez estimated and must expense $7,000 of accrued vacation benefits for the year. After Chavez makes this entry, how is the accounting equation effected?

Question options:

1)	Retained earnings decreases and current liabilities increases.

2)	Current assets and current liabilities increase.

3)	Equity decreases and vacation expense increases.

4)	Equity increases and long-term liabilities increase.