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11 April, 19:24

Land is purchased by a business for $100,000. The company pays for the land by a cash payment of $20,000 and promised to pay the remaining amount at a later period. What is net effect of this transaction on the business's accounting equation?

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  1. 11 April, 19:33
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    assets + 80,000

    liaiblities + 80,000

    equity: no effect

    Explanation:

    the land enter the accounting at cost, which is 100,000

    cash, which is an assets will decrease by 20,000

    the net effect on assets is 80,000

    (100,000 from lñand - 20,000 ecrease in cash)

    the amount financed through the promissory note will increase liaiblities for 80,000

    equity will not be affected.
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Home » Business » Land is purchased by a business for $100,000. The company pays for the land by a cash payment of $20,000 and promised to pay the remaining amount at a later period. What is net effect of this transaction on the business's accounting equation?
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