Question

Luxton Ltd. signed a $378,000, 5-year note payable to buy a new machine. Luxton paid $6,000 cash for transportation of the machine and $900 cash for installation costs. What is the overall effect of this transaction on the accounting equation

Answer 1

Answer:

$378,000

Explanation:

The answer to this question is quite simple

The Total Assets increase is $378,000

This is so due to the fact that the Notes Payable is $378,000 and there is no other transaction of liability

We have as net change on the asset to be $378000+$6900-_6900

This gives us = +$378000

Now this balances with a net increase in the 378,000 liability. Thus, the right answer is Total assets is going to increase by $378,000