Area Company purchased a delivery van at a cost of $30,000 cash on January 1, 20
ID: 2503032 • Letter: A
Question
Area Company purchased a delivery van at a cost of $30,000 cash on January 1, 2013. The van has an estimated useful life of 6 years and a $6,000 estimated residual value. What is the effect on the accounting equation of the purchase of the van?
Assets=Liabilities+Stockholders Equity and Revenues-Expenses=Net Income
I need to know where the numberss go in these two equations please. I know what the depreciation will be but the question is asking how the purchase of the van effects the accounting equations. Does a ($30,000) credit get shown under assets? Does $30,000 get shown under assets for the van? Are there any numbers listed as stockholders equity, expenses, revenues, net income? I need to know where the numberss go in these two equations please. I know what the depreciation will be but the question is asking how the purchase of the van effects the accounting equations. Does a ($30,000) credit get shown under assets? Does $30,000 get shown under assets for the van? Are there any numbers listed as stockholders equity, expenses, revenues, net income?Explanation / Answer
well there could be 2 cases:
CASE 1 : Asset is purchased for cash
then in asset column fixed asset increase by $30000 and cash go down by -$30000
equation becomes:
+30000 - 30000 + all other assets = equity + liabilities
CASE 2 : Asset is funded by increase in liablity (eg: credit purchase )
then equation becomes
+ 30000 + assets = equity + liability + 30000
in both the cases there is no effect on revenue- expense = income equation
equity also remains unchanged
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