Equipment Is Sold for Cash in an Amount Equal to the Cost

question 138

Multiple Choice

Equipment is sold for cash in an amount equal to the cost of the equipment recorded on the books.How does this sale affect the accounting equation?

• A) One asset increases; one asset decreases.
• B) Assets increase; liabilities increase.
• C) Assets increase; liabilities decrease.
• D) Assets increase; owner's equity increases.

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Definitions:

Capital Assets

Long-term assets acquired or invested in for the purpose of generating revenue over an extended period.

Fair Value

A measure of the value of an asset or liability based on current market prices.

Replacement Cost

The expense of replacing an asset at its current market price.

Net Realizable Value

The estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.