Q60. A&M Co. purchased land for $50,000 with $10,000 paid in cash and $40,000 in

Question

Q60. A&M Co. purchased land for $50,000 with $10,000 paid in cash and $40,000 in a note payable due three years from now. What effect does this transaction have on the accounts under the accrual basis of accounting? a. Net increase in assets of $40,000 and a net increase in liabilities of $40,000 b. Net increase in assets and liabilities of $50,000 c. Net increase in assets of $50,000 and a net decrease in liabilities of $40,000 d. Net increase in assets of $60,000 and a net decrease in liabilities of $40,000

Explanation / Answer

Answer:

a. Net increase in assets of $40,000 and a net increase in liabilities of $40,000

Explanation:

Land purchased = $50000

Less: Cash paid = ($10000)

Net increase in assets = $40000

Since Note payable is a liability, therefore, net increase in liability is of $40000.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.