promotion image of download ymail app
Promoted

Accounting 101?

On September 21, 2013, a company purchased $20,000 worth of equipment. It pays for half in cash, and half on credit due on October 21, 2013. What will be the effect on the company's net assets (shareholders' equity) as of September 21?

Group of answer choices

a)$0

b)+$10,000

c)-$10,000

d) +$20,000

e) -$20,000

Update:

Can anyone break down the answer very confusing.. Thnank You,

2 Answers

Relevance
  • cool
    Lv 6
    2 months ago

    It is a) $0

    You have to go through each action. Buying the equipment increases the 'physical' assets by $20,000, but you also lose $10,000 of cash, so you are now up by $10,000.

    But when you pay using credit, that is a liability because you owe the money to the other person/company.

    The $10,000 of credit means you are now down by $10,000.

    So the end result is that your assets cancelled out your liabilities.

    Equity = Assets - Liabilities.

    So the effect on net assets is zero. Hope this helps.

    • Commenter avatarLogin to reply the answers
  • Anonymous
    2 months ago

    maybe if you move it to homework help.   The question is easy as heck. You must not have a brain.

    • Commenter avatarLogin to reply the answers
Still have questions? Get your answers by asking now.