Question

Alpha company has assets of $602,000, liabilities of $251,000, and equity of $351,000. it buys office equipment on credit for $76,000. what would be the effects of this transaction on the accounting equation?

Answer 1

As we know assets = liabilities + equity

In this case assets would be increased by $76,000 and the liabilities would be increased by $76,000

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Answer 2

Assets and liabilities both would increase by $76,000

Explanation:

Alpha company has assets of $602,000

Liabilities of $251,000

and equity of $351,000

It buys office equipment on credit for $76,000.

Hence, assets would increase by $76,000 since, the payment has not been done it is on credit therefore, liabilities would also increase by $76,000

Now the Alpha company has assets of $602,000 + 76,000 = $678,000

and liabilities of $251,000 + $76,000 = $327,000

Assets and liabilities both would increase by $76,000