Question

On January 31, 2006, Allison Company purchased land for $8,500. The purchase would cause assets to:

-Decrease $8,500.
-Increase $8,500.
-Increase $17,000.
-Would not affect assets.

Answer 1

The purchase of land by Allison Company for $8,500 would exchange one asset for another without affecting the total assets.

Step-by-step explanation:

When Allison Company purchases land for $8,500, it is recording a transaction on its balance sheet. This purchase causes an exchange of one asset (cash) for another (land), so the total assets remain unchanged. Therefore, the correct answer is that the purchase would not affect the total amount of Allison Company's assets.

The purchase of land by Allison Company for $8,500 would increase assets by $8,500. Assets represent what a company owns, and in this case, the purchase of land would be recorded as an increase in an asset account called Land.