Land, originally purchased for $30,000, is sold for $62,000 in cash. What is the effect of the sale on the accounting equation?

A) assets increase by $62,000; stockholders' equity increases by $62,000
B) assets increase by $32,000; stockholders' equity increases by $32,000
C) assets increase by $62,000; liabilities decrease by $30,000; stockholders' equity increases by $32,000
D) assets increase by $30,000; no change in liabilities; stockholders' equity increases by $62,000

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dayana chanocua · Accepted Answer

Final Answer : B, Explanation :  The sale of the land increases cash (an asset) by $62,000 but also removes the land (another asset) valued at $30,000 from the books, resulting in a net increase in assets of $32,000. The $32,000 represents the gain on the sale, which increases stockholders' equity by the same amount. There is no effect on liabilities.

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