Essay
(a) A vacant lot acquired for $83,000 cash is sold for $127,000 in cash. What is the effect of the sale on the
total amount of the seller's (1) assets, (2) liabilities, and (3) stockholders' equity?
(b) Assume that the seller owes $52,000 on a loan for the land. After receiving the $127,000 cash in (a), the
seller pays the $52,000 owed. What is the effect of the payment on the total amount of the seller's (1) assets,
(2) liabilities, and (3) stockholders' equity?
Correct Answer:
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(a) (1) Total assets increased $44,000
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