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A plant asset is acquired by a business on January 2, 20X6, for $10,000. The asset's estimated residual value is $2,000 and it's estimated useful life is 5 years. Management chooses to use straight-line depreciation. On January 2. 20X8. the asset is sold for $5,000. The entry to record the sale has what effect on the financial statements? a. Assets decrease, expenses increase, and net income and owners' equity decrease. b. Assets decrease and owners' equity and expenses both increase. c. Has no effect on the financial statements if the journal entry is in balance. d. Assets increase, expenses decrease, and net income and owners' equity increase.

Respuesta :

Answer:

Option A

Explanation:

From the calculation below, it is clearly seen that Assets are being decreased and expenses are increased therefore Option A is correct.

Workings

Depreciation expense = (cost - residual value) / useful life

Depreciation expense = 10,000 - 2,000 / 5

Depreciation expense = $1600

Accumulated depreication = depreciation x 2 years -= $3,200

Carrying value = 10,000 - 3,200

Carrying value = $6,800

Disposal = $5,000

Loss on disposal = $1,800

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