The company purchases land for 24000 by paying cash 6000 and

The company purchases land for $24,000 by paying cash $6,000 and taking a 10-year mortgage for $18,000 (assume zero interest rate).

what is the balance sheet equation for that?

Solution

balancesheet equation
ASSSET = LAIBILITIES = SHAREHOLDER EQUITY

LAND IN FIXED ASSET WHICH WE PURCHASED SO OUR ASSET SIDE INCREASE BY 24000
CASH GIVEN FOR PURCHASE WILL DECREASE OUR ASSET BY 6000
MORTGAE LOAN IS A LONG TERM LAIBILITY WHICH WILL INCREASE OUR LAIBILITY BY 18000

SO EQUATION WILL BE

+24000(Land) -6000(cash) = 18000(LAIBILITY)

18000 = 18000

so net effect on both will be same