Question

Morris lest sold its truck and received less cash than the truck book value. the net effect of this sale on the accounting equation is an _____

a) decrease to assets
b) decrease to stockholders' equity

Answer 1

The sale of the truck for less cash than its book value would result in a decrease to assets in the accounting equation.

Step-by-step explanation:

When Morris Lest sold its truck for less cash than the truck's book value, it resulted in a decrease to assets on the accounting equation. The truck is considered an asset, and since the cash received was less than its book value, the value of assets decreases.

The accounting equation is a principle in accounting that says that a company’s assets must be equal to its liabilities and equity.

This equation relies on the double-entry system of accounting, where every transaction results in positive or negative changes to at least two of these accounts: assets, liabilities, or equity.

Therefore, the correct answer is a) decrease to assets