Question

A company sells machinery for a loss. What impact does this have on the company’s net income on the income statement?

A. It is decreased by the sale amount.
B. It is not changed.
C. It equals the sale amount.
D. It is increased by the sale amount.

Answer 1

Answer: D. It is increased by the sale amount.

Step-by-step explanation:

Answer 2

A. It is decreased by the sale amount.

Step-by-step explanation:

An income statement reports the profits or loss realized by a business in a particular period. In preparing the income statement, accountants consider all the revenues and expenses for that period. A loss occurs when expenses exceed revenues.

Gains or losses from sales of assets are reported in the income statement. Gain or profit is reported as income, while a loss is an expense. A loss from the sale of an asset increases expenses thereby, reducing the profits for that period.