The payment of $20,000 for expenses was incorrectly recorded by Elite Co. as an increase in cash of $20,000 and a decrease in retained earnings of $20,000. What is the effect of this error on the accounting equation?

a.Total assets will exceed total liabilities and stockholders' equity by $20,000.

b.Total assets will be less than total liabilities and stockholders' equity by $40,000.

c.Total assets will exceed total liabilities and stockholders' equity by $40,000.

d.The error will not affect the accounting equation.