If a parcel of land that was originally purchased for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000. What is the effect of the sale on the accounting equation for the seller?
A) Assets increase $52,000; owner's equity increases $52,000.
B) Assets increase $85,000; owner's equity increases $85,000.
C) Assets increase $137,000; owner's equity increases $137,000.
D) Assets increase $140,000; owner's equity increases $140,000.
E) Assets decrease $85,000; owner's equity decreases $85,000.

Question

Quizplus · Accepted Answer

The sale of the land for $137,000, when it was originally purchased for $85,000, results in a gain of $52,000. This increases the seller's assets by $52,000 (from the cash received) and increases the owner's equity by the same amount due to the profit from the sale.

If a Parcel of Land That Was Originally Purchased for $85,000