A company sold land for $60,000 in cash. The land was originally purchased for $40,000, and at the time of the sale, the company paid off the loan to the bank. What is the effect of the sale and the payoff of the loan on the accounting equation?

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Originally Posted by studentmom45

A company sold land for $60,000 in cash. The land was originally purchased for $40,000, and at the time of the sale, the company paid off the loan to the bank. What is the effect of the sale and the payoff of the loan on the accounting equation?

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OK the accounting equation is assets = liabilities+equity 40,000 was the land and it was the asset= the money owe to the bak which is the liability + the money you already pay which is the equity now you sold the land for 60,000 that's cash and is your new asset = now you pay the payable to the bank drecreasing your asset of 60,000 but making your liability 0 and your equety your revenue of 20,000 plus what you already paymaking assets equal liabilities plus equity

When the company sold the land
Assets - liabilities = Equity
60,000 - 40,000 =20,000
When the company pay off
Assets = Liabilities + equity
20,000 = 0000000 + 20,000
Before selling
Assets=Liabilities + Equity
40,000=40,000+00000
Hope this could help you

well qc mar what about when the company own the land
asset= liability + equaity
40,000= money owe to the bank+money paid
I think he wants areason to a written question a concept not just numbers that don't explain anything

naw you don't get it crazy hair I'm not giving actual value dumb head. I'm keeping the concept. 40,000= equals money owe to the bank (which does not equal 40,000)dumb head+ money you paid already which is the subtraction of your asset and liability
please read before you coment

No it does not especify whether we owe 40,000 or we owe less get the idea

It just say that it paid off the loan but we don't know how much was left to pay

Student101 when you don't know how much is being pay off you need to assume that it is for the original amount

Student101 when you don't know how much is being pay off you need to assume that it is for the original amount

then if is the original amount that means that you have pay nothing which makes equity equals 0 making the equation balance