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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