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Evaluate each of the following transactions in terms of their effect on assets, liabilities, and equity
Evaluate each of the following transactions in terms of their effect on assets, liabilities, and equity.
1. Purchase equipment for $50,000 in cash
2. Borrow $67,000 from a bank
What is the net change in Total Liabilities?
Expert Solution
Answer :
1. Purchase equipment for $50,000 in cash
Answer :
assets : Cash balance is decreased by $ 50000 and Equipment increased by $ 50000 so no net effect in total assets for this transaction.
liabilities : No effect on liabilities.
equity : No effect on equity.
2. Borrow $67,000 from a bank
assets : It will increase the cash balance by $ 67000 so Assets increased by $ 67000.
liabilities : It will increase the Loan so liabilities increased by $ 67000.
equity : No effect on equity.
Computation of net change in Total Liabilities
| Effect | Amount |
| (1) No effect | $ 0 |
| (2) Increase | $ 67000 |
| $ 67000 |
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