Asked by Christina Silverio on May 18, 2024
Verified
Which of the following is correct when land costing $20,000 is sold for $29,000? The land was a component of property and equipment on the balance sheet.
A) Revenues are debited for $29,000.
B) Cost of goods sold is credited for $20,000.
C) Gain on sale of land is credited for $9,000.
D) Operating income increases $29,000.
Gain On Sale
The profit realized when a capital asset is sold for a higher price than its purchase price.
Property And Equipment
Tangible assets owned by a business for use in the production or supply of goods and services or for rental to others.
- Accurately prepare and interpret journal entries for various accounting transactions.
Verified Answer
KG
Karan GuptaMay 19, 2024
Final Answer :
C
Explanation :
When land is sold, the gain on the sale is calculated by subtracting the cost of the land from the selling price. In this case, the land cost $20,000 and was sold for $29,000, resulting in a gain of $9,000. Therefore, the gain on sale of land is credited for $9,000. Revenues and cost of goods sold are not applicable in this scenario as the land was not a product being sold. Operating income may increase, but this cannot be determined solely based on the information given.
Learning Objectives
- Accurately prepare and interpret journal entries for various accounting transactions.
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