On January 1 (the beginning of the year), a company sold a piece of equipment for $30,000 which it had used for several years. The equipment had cost $45,000, and its accumulated depreciation amounted to $20,000 at the time of the sale. What are the net effects on the accounting equation of selling the equipment for the year?
A)Assets and Shareholders' Equity increase $30,000
B)Assets decrease and Shareholders' Equity increases $5,000.
C)Assets and Shareholders' Equity increase $5,000.
D)Assets and Shareholders' Equity decrease $5,000.

Question

Quizplus · Accepted Answer

The sale of the equipment for $30,000, when its book value was $25,000 ($45,000 cost - $20,000 accumulated depreciation), results in a gain of $5,000. This increases both assets (due to the cash received) and shareholders' equity (due to the gain) by $5,000.

On January 1 (The Beginning of the Year), a Company