Land is purchased by the business for $100 000. The company pays for land with a $20 000 cash payment and the execution of an $80 000 promissory note payable to the seller. How does this purchase affect the business's accounting equation?

Question

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The land purchase increases assets by $100,000 (land) and decreases assets by $20,000 (cash), resulting in a net increase of $80,000 in assets. The $80,000 promissory note increases liabilities by $80,000.

Land Is Purchased by the Business for $100 000