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24 July, 08:19

Alpha Company has assets of $614,000, liabilities of $257,000, and equity of $357,000. It buys office equipment on credit for $82,000. What would be the effects of this transaction on the accounting equation?

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  1. 24 July, 08:27
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    Assets will increase by $82,000 and liabilities will increase by $82,000

    Explanation:

    The Accounting Equation of the Accounts is as:

    Assets = Liabilities + Owners Equity

    where

    Assets worth $614,000

    Liabilities worth $257,000

    Equity worth $357,000

    $614,000 = $257,000 + $357,000

    So, the equipment is bought on credit worth $82,000, it will result in increase in the assets because of purchase as well as increase in liabilities as purchased on credit by the amount of $82,000.
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