A&M Co. purchased land for $50,000 with $10,000 paid in cash and $40,000 in a note payable due three years from now. What effect does this transaction have on the accounts under the accrual basis of accounting?

Question

Quizplus · Accepted Answer

The land purchase increases assets by $50,000 (land) and decreases assets by $10,000 (cash), resulting in a net increase of $40,000 in assets. The note payable increases liabilities by $40,000, resulting in a net increase in liabilities of $40,000.

A&M Co Purchased Land for $50,000 with $10,000 Paid in Cash