When a company buys equipment for $60,000 and pays for one third in cash and the other two thirds is financed by a note payable, which of the following are the effects on the accounting equation?

Question

Quizplus · Accepted Answer

The company pays $20,000 in cash (1/3 of $60,000), decreasing cash (an asset) by $20,000, and finances $40,000 with a note payable, increasing liabilities by $40,000. Equipment (an asset) increases by $60,000, so the net effect on total assets is an increase of $40,000, not $60,000.

When a Company Buys Equipment for $60,000 and Pays for One