Purchasing a building for $120,000 by paying cash of $30,000 and obtaining a mortgage for $90,000 would:
A)increase assets and increase liabilities by $90,000.
B)increase owner's equity by $90,000.
C)increase liabilities by $30,000.
D)decrease assets and decrease liabilities by $30,000.

Question

Quizplus · Accepted Answer

Purchasing a building for $120,000 with $30,000 in cash and a $90,000 mortgage increases assets (the building) by $120,000 and increases liabilities (the mortgage) by $90,000. The cash payment reduces another asset (cash) by $30,000, so the net increase in assets is $90,000, matching the increase in liabilities.

Purchasing a Building for $120,000 by Paying Cash of $30,000