Question

The balance sheet of Bravo Corporation contains the following list of assets: Cash $8,500,000; Land, $4,700,000; Buildings, $1,300,000; and Other Assets, $200,000. Bravo' only debt is $2,070,000 to a bank. How much will stockholders' equity change when Bravo borrows $300,000 to purchase equipment?

Answer 1

when bravo borrows $300,000 to purchase an equipment ,an asset is inwarded to the business,and a liability of the same amount is created .As a result of the  transaction stock holders equity  remains unaffected.

Explanation:

First we will calculate the  stockholders' equity.  we will calculate the same by calculating  total assets, and then the equity.

Cash                8,500,000

Land                  4,700,000

Building            1,300,000

Other Assets      200,000  

So the Total Assets =    14,700,000

Liabilities            2,070,000

Assets = Liabilities + Equity

Assets - Liabilities = Equity

14,700,000 - 2,070,000 = Equity

Stock holders Equity = 12,630,000

How much will stockholders' equity change when Bravo borrows $300,000 to purchase equipment

when bravo borrows $300,000 to purchase an equipment ,an asset is inwarded to the business,and a liability of the same amount is created .As a result this transaction does not affect stock holders equity at all