Murphy Company Had Originally Purchased Land for $35,000

question 42

Multiple Choice

Murphy Company had originally purchased land for $35,000.It later sold it for $35,000 in cash.Which of the following is true of the effect of the sale of land on the accounting equation?

• A)assets increase and liabilities decrease by $35,000
• B)assets and equity increase by $70,000
• C)assets increase by $35,000;equity increases by $35,000
• D)the amount of total assets remains the same

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Definitions:

Substitution Effect

The economic understanding that as prices rise (or incomes decrease), consumers will replace more expensive items with less costly alternatives.

Inferior Good

A type of good for which demand decreases when the income of the consumer increases, inversely related to normal goods.

Income Effect

The change in an individual's or economy's income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

Refers to the change in consumption patterns due to a change in the relative prices of goods, holding the consumer's utility constant.