Question

A vacant lot acquired for $115,000 is sold for $298,000 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

Answer 1

Step-by-step explanation:

Since it is given that

Acquiring value of an vacant lot = $115,000

Sale value of the vacant lot in cash = $298,000

Since the sale value is more than the acquiring value which reflects the increment in the asset for $183,000 due to which the profit is also increased for $183,000 i.e retained earnings

Now the effect is shown below:

1. Assets = Increase = $183,000

2. Liabilities = No change = $0

3. Stockholder equity = Increased = $183,000