Question

The company purchases land for $24,000 by paying cash $6,000 and taking a 10-year mortgage for $18,000 (assume zero interest rate). What is the balance sheet equation for that?

Answer 1

Land - cash = Total liabilities

Step-by-step explanation:

As we know that

Total assets = Total liabilities + stockholder equity

Where,

Land = $24,000

Cash = $6,000

And long term liabilities = $18,000

So, the equation would be

Land - cash = Total liabilities

$24,000 - $6,000 = $18,000

$18,000 = $18,000

So by this we can match and balanced our company balance sheet as we see that the amount are equaled and matched.