A machine with a book value of $38,000 is sold for $32,000.Which of the following answers would accurately represent the effects of the sale on the elements of the financial statements?

Question

Quizplus · Accepted Answer

The sale increases assets (cash) by $32,000, decreases assets (machine less its accumulated depreciation) by $38,000, for a net decrease in assets of $6,000. Because the machine is sold for $6,000 less than its book value, the company records a loss on the sale of $6,000, which decreases net income and stockholders' equity (retained earnings). The $32,000 cash received is reported as a cash inflow from investing activities.

A Machine with a Book Value of $38,000 Is Sold