Asked by Elizabeth Offer on May 28, 2024
Verified
Austin Land Company sold land for $85,000 in cash. The land was originally purchased for $65,000. At the time of the sale, $40,000 was still owed to Regions Bank. After the sale, Austin Land Company paid off the loan. Explain the effect of the sale and the payoff of the loan on the accounting equation.
Payoff
The act of completely repaying a loan, including the principal amount and any accrued interest, thereby fulfilling the borrower's obligations.
Sale
The act of selling goods or services in exchange for money or other compensation, constituting a fundamental business activity.
- Understand the impact of different transactions on the accounting equation.
- Determine the effects of buying and selling assets on a company's financial position.
Verified Answer
MC
megan coutsMay 29, 2024
Final Answer :
Total assets decrease $20,000 (Cash increases by $45,000; Land decreases by $65,000)Total liabilities decrease $40,000 (Note payoff to Regions)Owner's equity increases $20,000 (Sales price ? Cost of the land)
Learning Objectives
- Understand the impact of different transactions on the accounting equation.
- Determine the effects of buying and selling assets on a company's financial position.
Related questions
Simpson Auto Body Repair Purchased $20,000 of Machinery ...
Ramierez Company Received Its First Electric Bill in the Amount ...
Collins Landscape Company Purchased Various Landscaping Supplies on Account to ...
Daniels Company Is Owned and Operated by Thomas Daniels ...
Indicate How the Following Transactions Affect the Accounting Equation ...