Alpha Company has assets of $614,000, liabilities of $257,000, and equity of $357,000. It buys office equipment on credit for $82,000. What would be the effects of this transaction on the accounting equation?

Question

Business

Clare Solomon

26 February, 18:39

Alpha Company has assets of $614,000, liabilities of $257,000, and equity of $357,000. It buys office equipment on credit for $82,000. What would be the effects of this transaction on the accounting equation?

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Answers (1)

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Fernando Shepherd · Answer 1

Assets will increase by $82,000 and liabilities will increase by $82,000

Explanation:

The Accounting Equation of the Accounts is as:

Assets = Liabilities + Owners Equity

where

Assets worth $614,000

Liabilities worth $257,000

Equity worth $357,000

$614,000 = $257,000 + $357,000

So, the equipment is bought on credit worth $82,000, it will result in increase in the assets because of purchase as well as increase in liabilities as purchased on credit by the amount of $82,000.