Austin Land Company sold land for $85,000 in cash. The land was originally purchased for $65,000. At the time of the sale, $40,000 was still owed to Regions Bank. After the sale, Austin Land Company paid off the loan. Explain the effect of the sale and the payoff of the loan on the accounting equation.

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megan couts · Accepted Answer

Final Answer : Total assets decrease $20,000  (Cash increases by $45,000; Land decreases by $65,000)Total liabilities decrease $40,000  (Note payoff to Regions)Owner's equity increases $20,000  (Sales price ? Cost of the land)

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