Question

The sale of an asset on credit for what it cost

A) increases assets and liabilities
B) decreases assets and liabilities
C) leaves total assets unchanged
D) decreases assets and increases liabilities

Answer 1

The sale of an asset on credit at cost leaves total assets unchanged because one asset is decreased while another asset, accounts receivable, is increased by the same amount, with no immediate change to liabilities. The correct answer is option c.

Step-by-step explanation:

When a sale of an asset on credit for what it cost occurs, it generally reflects a transaction where the asset leaves the company's possession but the cash has not yet been received. Instead, the company gains an accounts receivable, which is a claim to cash.

Therefore, one asset (the sold asset) is decreased while another asset (accounts receivable) increases by the same amount, leaving total assets unchanged. At the same time, since the sale is on credit, there are no immediate changes to liabilities. The correct answer to the question is C) leaves total assets unchanged.