Ask Question
11 January, 08:53

Alpha Company has assets of $630,000, liabilities of $265,000, and equity of $365,000. It buys office equipment on credit for $90,000. What would be the effects of this transaction on the accounting equation?

+5
Answers (1)
  1. 11 January, 09:49
    0
    Assets and liabilities increase by $90,000.

    $720,000 = $355,000 + $365,000

    Explanation:

    The accounting equation is:

    Assets = Liabilities + Equity

    Equation before transaction:

    $630,000 = $265,000 + $365,000

    If Alpha Company buys on credit, this means they borrow money to pay for the equipment.

    Borrowed money, either as a loan or an account payable, is a liability. This increases because by borrowing money, the company owes more money.

    Office equipment is an asset. This increases because you bought more equipment that the company now owns.

    Both assets and liabilities increase by $90,000.

    Showing transaction:

    ($630,000 + $90,000) = ($265,000 + $90,000) + $365,000

    Equation after transaction:

    $720,000 = $355,000 + $365,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Alpha Company has assets of $630,000, liabilities of $265,000, and equity of $365,000. It buys office equipment on credit for $90,000. What ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers