An asset with a book value of $19,000 is sold for $16,000.Which of the following answers would accurately represent the effects of the sale on the financial statements? (Note: The answers show the net effect on the total amount under each category.For example,if cash increased by $100 and Accounts Receivable decreased by $70,a net $30 increase would be shown in the assets column.)

Question

Quizplus · Accepted Answer

The sale of the asset results in a decrease in assets (from the sale of the asset) and an increase in cash (from the receipt of payment). The book value of the asset is less than the sale price, resulting in a loss. This loss is recognized in the income statement, which results in a decrease in equity. The decrease in the asset account and equity account are greater than the increase in the cash account, resulting in a net decrease in total assets and equity. Hence, the only choice that shows a decrease in both assets and equity is D.

An Asset with a Book Value of $19,000 Is Sold