A transaction caused an increase in both assets and equity. This transaction could have been:
A) A sale of service to a customer producing revenue.
B) Sale of land for a price less than its cost.
C) Borrowing money from a bank.
D) Sale of land for cash at a price equal to its cost.

Question

Quizplus · Accepted Answer

When a service is sold to a customer producing revenue, it increases the assets (cash or accounts receivable) and the equity (revenue). Therefore, it is the only option that could result in an increase in both assets and equity without any offsetting decrease in another account. Option B results in a decrease in both assets and equity due to the loss on the sale of land, while option C would increase assets but also increase liabilities, resulting in no change in equity. Option D results in no change in equity since the sale price is equal to the cost of the land, which means there is no gain or loss on the sale.

A Transaction Caused an Increase in Both Assets and Equity