Question

Land originally purchased for $25,574 is sold for $78,584 in cash. What is the effect of the sale on the accounting equation?

Answer 1

assets increase by $$53,010; owner’s equity increases by $$53,010

Step-by-step explanation:

Calculation for the What is the effect of the sale on the accounting equation

Using this formula

Profit on sale of land = Proceed from sale - Cost of land

Let plug in the formula

Profit on sale of land =$78,584 -$25,574

Profit on sale of land = $53,010

The accounts that will be affected in the accounting equation are:

Cash will increase by $78,584

Land will decrease by $25,574

Owners equity will increase by $53,010

Therefore the effect of the sale on the accounting equation is that Assets increase by $53,010; Owner’s equity increases by $53,010