Rosewood Corporation purchased land for $100,000 by making a cash payment of $38,000 and promising to pay the remaining amount in a later accounting period. What is the net effect of this transaction on Rosewood's accounting equation?

Question

Quizplus · Accepted Answer

The land purchase increases assets (land) by $100,000. The cash payment decreases another asset (cash) by $38,000, resulting in a net asset increase of $62,000. The promise to pay the remaining amount increases liabilities by $62,000, with no effect on equity in this transaction.

Rosewood Corporation Purchased Land for $100,000 by Making a Cash