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6 August, 09:52

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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  1. 6 August, 13:48
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    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.
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