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3 May, 07:07

The balance sheet of Bravo Corporation contains the following list of assets: Cash $8,500,000; Land, $4,700,000; Buildings, $1,300,000; and Other Assets, $200,000. Bravo' only debt is $2,070,000 to a bank. How much will stockholders' equity change when Bravo borrows $300,000 to purchase equipment?

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  1. 3 May, 10:26
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    when bravo borrows $300,000 to purchase an equipment, an asset is inwarded to the business, and a liability of the same amount is created. As a result of the transaction stock holders equity remains unaffected.

    Explanation:

    First we will calculate the stockholders' equity. we will calculate the same by calculating total assets, and then the equity.

    Cash 8,500,000

    Land 4,700,000

    Building 1,300,000

    Other Assets 200,000

    So the Total Assets = 14,700,000

    Liabilities 2,070,000

    Assets = Liabilities + Equity

    Assets - Liabilities = Equity

    14,700,000 - 2,070,000 = Equity

    Stock holders Equity = 12,630,000

    How much will stockholders' equity change when Bravo borrows $300,000 to purchase equipment

    when bravo borrows $300,000 to purchase an equipment, an asset is inwarded to the business, and a liability of the same amount is created. As a result this transaction does not affect stock holders equity at all
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