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
Can anyone break down the answer very confusing.. Thnank You,
- coolLv 62 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.
- Anonymous2 months ago
maybe if you move it to homework help. The question is easy as heck. You must not have a brain.