Electrodo Co.purchased land for $55,000 with $20,000 paid in cash and $35,000 in notes payable.What effect does this transaction have on the accounts under the accrual basis of accounting?
A) Net increase in assets and liabilities of $55,000
B) Net increase in assets of $35,000 and a net increase in liabilities of $35,000
C) Net increase in assets of $55,000 and a net decrease in liabilities of $35,000
D) Net increase in assets of $75,000 and a net decrease in liabilities of $30,000

Question

Quizplus · Accepted Answer

The transaction increases assets (land) by $55,000 and increases liabilities (notes payable) by $35,000. Cash, an asset, decreases by $20,000, but this is offset by the increase in land, leading to a net increase in assets of $35,000.