Effect of Transactions on Accounting Equation A vacant lot acquired for $412,500

Question

Effect of Transactions on Accounting Equation A vacant lot acquired for $412,500 is sold for $796,000 in cash. What is the effect of the sale on the total amount of the seller's assets, liabilities, and stockholders' equity? If there is no change, select 'No change' from the dropdown and then enter a "0" in the amount box. Assume that the seller owes $115,500 on a loan for the land. After receiving the $796,000 cash in (a), the seller pays the $115,500 owed. What is the effect of the payment on the total amount of the seller's assets, liabilities, and stockholders' equity? If there is no change, select 'No change' from the dropdown and then enter a '0' in the amount box. Is it true that a transaction always affects at least two elements (Assets, Liabilities, or Stockholders' Equity) of the accounting equation?

Explanation / Answer

a) Cash Dr 796000                Land Cr 412500                Income from sale of land Cr 383500 Total Assets Increase ( 796000-412500) 383500 Total Liabilities No change Stockholders equity Increase 383500 b) Loan Dr 115500                 Cash Cr 115500 Total Assets Decrease 115500 Total Liabilities Decrease 115500 Stockholders equity No change

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