Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 11

For the following questions, circle the best response.

Which of the following transactions resulted in a $35,000 increase in assets and a $35,000 increase in liabilities?

a. Collected accounts receivable of $35,000.

b. Paid accounts payable of $35,000.

c. Purchased land for $50,000, paying $15,000 in cash as a down payment and signing a note payable for the balance.

d. Purchased on account, and used, $35,000 worth of office supplies during the period.

e. Reclassified a $35,000 account receivable as a note receivable when the customer failed to pay on time.

Step 1 of 2

The transaction which increases assets and liabilities would be purchasing land and paying for it using cash and notes payable. The purchase of land would increase assets and the notes payable would increase the liabilities. Since part of the purchase of land is done using cash, there is no net change in assets for this since cash is a part of assets.

The correct option is c i.e. purchased land for $50,000 paying $15,000 in cash as a down payment and signing a note payable for the balance.