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28 June, 17:13

Accord Company purchased land for $100,000 by making a cash payment of $30,000 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?

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  1. 28 June, 18:09
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    Assets and liabilities both will increase by $70,000.

    Explanation:

    Given data provided

    Purchase land = $100,000

    Cash payment = $30,000

    The computation of net effect is shown below:-

    = Purchase land - Cash payment

    = $100,000 - $30,000

    = $70,000

    Therefore, for computing the net effect we simply deduct cash payment from purchase land. So, Assets and liabilities both will increase by $70,000.
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