Farmer Company sold a piece of equipment for $6,000.The equipment had an original cost of $34,000 and accumulated depreciation of $31,000 at the time of the sale.Which of the following correctly shows the effect of the sale on the elements of the financial statements?

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The sale increases assets (cash) by $6,000, decreases assets (equipment) by $34,000, and increases assets (by decreasing accumulated depreciation, a contra asset account) by $31,000, resulting in a net increase in assets of $3,000. Because the selling price of $6,000 is greater than the equipment's book value of $3,000 (or $34,000 ? $31,000), Farmer reports a gain on the sale of $3,000, which increases revenue, net income, and stockholders' equity (retained earnings). The $6,000 cash proceeds are reported as a cash inflow for investing activities.

Farmer Company Sold a Piece of Equipment for $6,000