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 be less than total liabilities and stockholders' equity by $40,000.
b. Total assets will exceed total liabilities and stockholders' equity by $20,000.
c. The error will not affect the accounting equation.
d. Total assets will exceed total liabilities and stockholders' equity by $40,000