Question

A vacant lot acquired for $500,000, on which there is a balance owed of $300,000, is sold for $660,000 in cash. The seller pays the $300,000 owed. What is the effect of these transactions on the total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity

Answer 1

Answer: See explanation

Step-by-step explanation:

The effect of these transactions on the total amount of the seller's

(1) assets will be:

= Sales - (Aquisition value + Balance Owed)

= $660,000 - ($500,000 + $300,000)

= $660,000 - $800,000

= -$140,000

Decreased $140,000

2. Liabilities: Decreased by $300,000. This is because the seller paid the $300,000 owed.

3. Stock holder's Equity will be gotten by subtracting the acqusition value from the sales value. This will be:

= $660,000 - $500,000

= $160,000.

Increased by $160,000