Answer:
Assets and liabilities increase by $90,000.
$720,000 = $355,000 + $365,000
Explanation:
The accounting equation is:
Assets = Liabilities + Equity
Equation before transaction:
$630,000 = $265,000 + $365,000
If Alpha Company buys on credit, this means they borrow money to pay for the equipment.
Borrowed money, either as a loan or an account payable, is a liability. This increases because by borrowing money, the company owes more money.
Office equipment is an asset. This increases because you bought more equipment that the company now owns.
Both assets and liabilities increase by $90,000.
Showing transaction:
($630,000 + $90,000) = ($265,000 + $90,000) + $365,000
Equation after transaction:
$720,000 = $355,000 + $365,000
