Universal Corp.sold a used piece of machinery for $11,000 that it had purchased for $15,000.At the time of the sale,accumulated depreciation relating to the machinery was $6,000.As a result of this sale:
A)assets increase by $11,000.
B)revenues increase by $2,000.
C)net income increases by $2,000.
D)assets decrease by $4,000.

Question

Quizplus · Accepted Answer

The journal entry to record the sale is as follows: Debit Cash (to increase this asset account)for $11,000,debit Accumulated Depreciation (to decrease this contra-asset account)for $6,000,credit Truck (to decrease this asset account)for $15,000,and credit Gain on Sale (to increase this revenue account)for $2,000.The net effect on assets is an increase of $2,000 (or $11,000 + $6,000 − $15,000);net income increases by $2,000.Gains increase net income,but they are not considered revenue accounts.