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

question 88

Multiple Choice

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. At the time of the sale, assume that the seller still owed $30,000 to TrustOne Bank on the land that was purchased for $85,000. Immediately after the sale, the seller paid off the loan to TrustOne Bank. What is the effect of the sale and the payoff of the loan on the accounting equation?

• A) Assets increase $52,000; owner's equity increases $22,000; liabilities decrease $30,000
• B) Assets increase $52,000; owner's equity increases $30,000; liabilities decrease $30,000
• C) Assets increase $22,000; owner's equity increases $52,000; liabilities decrease $30,000
• D) Assets decrease $30,000; owner's equity decreases $30,000; liabilities decrease $30,000
• E) Assets decrease $55,000; owner's equity decreases $55,000; liabilities decrease $30,000

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Definitions:

Associations

Groups or organizations formed for a specific purpose, which can range from professional guilds to social clubs, often characterized by a shared interest or goal.

Act of Joining

This refers to the process of connecting or uniting different elements, groups, or structures.

Eskimo System

Refers to a kinship system that distinguishes relatives based directly on their relationship to the ego or the speaker, common in Western societies.

Equal Prestige

Situation in which different statuses, roles, or positions in society are regarded as equally respectable.