Accord Company purchased land for $120,000 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 Accord's accounting equation?

Question

Quizplus · Accepted Answer

The land purchase increases assets by $120,000. The cash payment decreases assets by $38,000, and the promise to pay later increases liabilities by $82,000. Thus, assets and liabilities both increase by $82,000.

Accord Company Purchased Land for $120,000 by Making a Cash