A vacant lot is acquired for $83,000 cash. Later the owner borrows $52,000 against the land. Three years later, the lot is then sold for $127,000 in cash. After receiving the $127,000 sales price in cash, the seller pay off the loan of the $52,000 owed. What is the effect of the $52,000 payment of the loan on the total amount of the seller’s (1) assets, (2) liabilities, and (3) stockholders’ equity? Assets increase $127,000; liabilities decrease $52,000; Stockholders’ equity increases $44,000The payment of the loan has no net effect on any of the categoriesAssets decrease $52,000; liabilities decrease $52,000; Stockholders’ equity increases $44,000Assets decrease $52,000; liabilities decrease $52,000; Stockholders’ equity is unchanged

Whenever an asset is sold it results in cash inflow for the entity and increase the cash balance of…

Answered: A vacant lot is acquired for $83,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A vacant lot is acquired for $83,000 cash. Later the owner borrows $52,000 against the land. Three years later, the lot is then sold for $127,000 in cash. After receiving the $127,000 sales price in cash, the seller pay off the loan of the $52,000 owed. What is the effect of the $52,000 payment of the loan on the total amount of the seller’s (1) assets, (2) liabilities, and (3) stockholders’ equity?

Assets increase $127,000; liabilities decrease $52,000; Stockholders’ equity increases $44,000
The payment of the loan has no net effect on any of the categories
Assets decrease $52,000; liabilities decrease $52,000; Stockholders’ equity increases $44,000
Assets decrease $52,000; liabilities decrease $52,000; Stockholders’ equity is unchanged

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