Final answer:
The purchase of equipment for cash reduces the cash asset while increasing the equipment asset, keeping the Assets = Liabilities + Equity equation in balance, with no change in liabilities or equity.
Step-by-step explanation:
When Tree Co. purchased equipment for cash on March 7, this transaction affected the accounting equation by decreasing cash (an asset) and increasing equipment (also an asset), with no immediate effect on liabilities or equity.
The accounting equation, which states that Assets = Liabilities + Equity, remains in balance because the decrease in cash is offset by a corresponding increase in equipment. For instance, if the equipment was purchased for $10,000, cash would decrease by $10,000 while equipment would increase by $10,000, maintaining equilibrium in the equation. No new liabilities are created since the purchase was made with cash, and equity remains unchanged because there was no profit or loss from this transaction.