A business sold equipment for $40,000 cash.They purchased the equipment one day earlier for $40,000 but changed their plans.

Question

Quizplus · Accepted Answer

When the business sells equipment for cash, it should debit Cash (the asset that is received) and credit Equipment (the asset that is given up). Option A is incorrect because it credits Cash instead of debiting it. Option B is incorrect because Retained Earnings should not be affected by this transaction. Option D is incorrect because it incorrectly debits Retained Earnings, which should only be affected by profits, losses, dividends, and other similar transactions.

A Business Sold Equipment for $40,000 Cash