Question

can you give me the answer and explain why?also can you explain why C is incorrect. thx

26. | A corporation purchases land for $200,000 by paying a down payment of $20,000 and by signing a note payable for the remainder of the purchase price. Which of the following statements correctly shows the effect of this transaction on the accounting equation? Assets will increase by $200,000; liabilities will increase by $180,000 and stockholders' equity will increase by $20,000. Assets will increase by $180,000; liabilities will increase by $200,000 and stockholders' equity will decrease by $20,000. Assets will increase by $180,000; liabilities will remain unchanged and stockholders' equity will increase by $180,000. Assets will increase by $180,000; liabilities will increase by $180,000 and stockholders' equity remains unchanged. None of the choices are correct.

Answer 1

Correct answer--------(D) Assets will increase by $180000, Liabilities will increase by $180000 and stockholder's equity remains unchanged.

Transaction will be recorded as follows.

	Assets=	Liabilities+	Equity
Land	$ 200,000.00
Cash	$ (20,000.00)
Notes payable		$ 180,000.00
Total effect of transaction	$ 180,000.00	$ 180,000.00	$                 -

There is no effect on stockholder's equity because of this transaction.

The liability increase due notes payable of 180,000 and asset in total increase by 180,000.