Effect of transactions on accounting equation a. A vacant lot acquired for $115,000 is sold for $298,000 in cash. What is the effect of the sale on the total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity? If there is no change, select 'No change' from the dropdown and then enter a "0" in the amount box. Line Item Description Effect Amount 1. Total assets $fill in the blank 2 2. Total liabilities $fill in the blank 4 3. Stockholders' equity $fill in the blank 6 b. Assume that the seller owes $80,000 on a loan for the land. After receiving the $298,000 cash in (a), the seller pays the $80,000 owed. What is the effect of the payment on the total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity? If there is no change, select 'No change' from the dropdown and then enter a "0" in the amount box. Consider only the payoff of the loan, without considering the sale of the land. Line Item Description Effect Amount 1. Total assets $fill in the blank 8 2. Total liabilities $fill in the blank 10 3. Stockholders' equity $fill in the blank 12 c. Is it true that a transaction always affects at least two elements (Assets, Liabilities, or Stockholders' Equity) of the accounting equation?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Effect of transactions on accounting equation

a. A vacant lot acquired for $115,000 is sold for $298,000 in cash. What is the effect of the sale on the total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity? If there is no change, select 'No change' from the dropdown and then enter a "0" in the amount box.

Line Item Description	Effect	Amount
1. Total assets		$fill in the blank 2
2. Total liabilities		$fill in the blank 4
3. Stockholders' equity		$fill in the blank 6

b. Assume that the seller owes $80,000 on a loan for the land. After receiving the $298,000 cash in (a), the seller pays the $80,000 owed. What is the effect of the payment on the total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity? If there is no change, select 'No change' from the dropdown and then enter a "0" in the amount box. Consider only the payoff of the loan, without considering the sale of the land.

Line Item Description	Effect	Amount
1. Total assets		$fill in the blank 8
2. Total liabilities		$fill in the blank 10
3. Stockholders' equity		$fill in the blank 12

c. Is it true that a transaction always affects at least two elements (Assets, Liabilities, or Stockholders' Equity) of the accounting equation?

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