Bob Allen's Company Sells for Cash a Machine It Purchased

question 113

Multiple Choice

Bob Allen's Company sells for cash a machine it purchased last week for its cost of $15,000. This has the effect of

• A) decreasing liabilities and increasing owner's equity.
• B) decreasing assets and decreasing liabilities.
• C) decreasing assets and increasing owner's equity.
• D) no change to the overall accounting equation.

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Definitions:

Prior-Period Adjustment

Corrections of errors made in previously published financial statements, not considered ordinary adjustments.

Net Income

The net income a company earns following the subtraction of all expenses and taxes from its total revenue.

Accounting Methods

Accounting methods are the specific principles and procedures implemented by a business or organization to prepare its financial statements.

Rigid Accounting Rules

Accounting practices that are strictly defined with little to no room for interpretation or flexibility in their application.