Morris Lest,Inc.sold its truck and received less cash than the truck's book value.The net effect of this sale on the accounting equation is a(n):
A)increase to total assets.
B)increase to stockholders' equity.
C)decrease to total liabilities.
D)decrease to stockholders' equity.

Question

Quizplus · Accepted Answer

When a long-lived asset is sold at a loss,the proceeds (which increase total assets)are less than the book value of the asset (which decreases total assets.The net effect is a decrease to total assets.Since the long-lived asset was sold at a loss,net income will be decreased as will stockholders' equity.