Question

At the beginning of the period, a company had $350,000 worth of assets, $110,000 worth of liabilities, and $240,000 worth of equity. Assume the only change during the period was a $30,000 purchase of equipment by issuing a note payable. Show the accounting equation with the appropriate amounts at the end of the period.

Answer 1

After purchasing equipment for $30,000 by issuing a note payable, the company's assets and liabilities increase by $30,000, making the end-of-period accounting equation $380,000 in assets = $140,000 in liabilities + $240,000 in equity.

Step-by-step explanation:

The question involves understanding the impact of purchasing equipment by issuing a note payable on a company's accounting equation at the end of a period. At the beginning, the company had assets of $350,000, liabilities of $110,000, and equity of $240,000. With the purchase of equipment for $30,000 by issuing a note payable, both assets and liabilities increase by $30,000.

The revised accounting equation showing the company's financial position at the end of the period would be:

• Assets: $350,000 + $30,000 (new equipment) = $380,000
• Liabilities: $110,000 + $30,000 (note payable) = $140,000
• Equity: Remains the same at $240,000

Therefore, the accounting equation at the end of the period stands as:

Assets = Liabilities + Equity

$380,000 = $140,000 + $240,000.