Which of the following statements is correct with respect to a loss on the sale of a depreciable asset?
A)Net income decreases and total assets increase.
B)Net income decreases and stockholders' equity increases.
C)Total assets decrease and stockholders' equity decreases.
D)Total assets increase and stockholders' equity decreases.

Question

Quizplus · Accepted Answer

When a depreciable asset is sold at a loss, it results in a decrease in total assets (as the asset is no longer owned) and a decrease in stockholders' equity (due to the loss being subtracted from retained earnings). This decrease in stockholders' equity also leads to a decrease in net income. Therefore, option C is the correct statement.

Which of the Following Statements Is Correct with Respect to a Loss