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You start your business today by investing $40,000 cash in exchange for capital stock in the...

You start your business today by investing $40,000 cash in exchange for capital stock in the company, immediately after that transaction, what will the balance sheet equation show?

Please explain your answer.
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Answer #1

The accounting equation would be

Assets = Liabilities + Equity

40,000 = Liabilities + 40,000

.

The business will have $40,000 cash balance on its assets side and will have the capital of $40,000 on liabilities side.

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