A machine with a book value of $19,000 is sold for $16,000. Which of the following answers would accurately represent the effects of the sale on the financial statements?
A)Option A
B)Option B
C)Option C
D)Option D

Question

A machine with a book value of $19,000 is sold for $16,000. Which of the following answers would accurately represent the effects of the sale on the financial statements? 
A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

The cash received increases assets by $16,000, the machine (and its accumulated depreciation) decrease assets by $19,000, for a net decrease in assets of $3,000. Because the machine is sold for $3,000 less than its book value, the company records a loss on the sale of $3,000, which decreases net income and equity. The $16,000 cash received is reported as a cash inflow from investing activities.

A Machine with a Book Value of $19,000 Is Sold