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A truck costing $30,000 is bought with a $10,000 down payment and a $20,000 loan. How does this fit the accounting equation?
A$30,000 = $20,000 + $10,000
B$30,000 = $10,000 + $20,000
C$30,000 = $30,000 + $0
D$20,000 = $10,000 + $10,000
Answer & Solution
Correct answer: A. $30,000 = $20,000 + $10,000
1. The asset acquired is the truck at $30,000, the left side of the equation.
2. The liability is the $20,000 loan from other people's money.
3. The equity portion is the $10,000 down payment of the owner's own money.
4. So $30{,}000 = 20{,}000 + 10{,}000$, matching option A.
5. Option B swaps the liability and equity figures; option C ignores the loan; option D uses the wrong asset total.
6. Therefore $30,000 = $20,000 + $10,000.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.7 "The Accounting Equation", p.42_
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