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?

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andromache andromache · Answer 1 · 2020-01-30T07:07:23-05:00

Answer:

Land - cash = Total liabilities

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.