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22 March, 19:07

A machine with a book value of $38,000 is sold for $32,000. Which of the following answers would accurately represent the effects of the sale on the financial statements? Assets = Liab. + Equity Rev./Gain - Exp./Loss = Net Inc. Cash Flow A. 38,000 = NA + 38,000 38,000 - NA = 38,000 38,000 IA B. (6,000) = NA + (6,000) NA - 6,000 = (6,000) 6,000 OA C. (6,000) = NA + (6,000) NA - 6,000 = (6,000) 6,000 IA D. (6,000) = NA + (6,000) NA - 6,000 = (6,000) 32,000 IA

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  1. 22 March, 21:45
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    D. (6,000) = NA + (6,000) NA - 6,000 = (6,000) 32,000 IA

    Explanation:

    Since it is given that the book value of machine is $38,000 and it is sold for $32,000

    So it impacts on the financial statement is as follows

    Assets = - $6,000 Since sale value is less than the book value

    Liabilities = NA as it does not impact the liabilities

    Equity = - $6,000

    Rev/Gain = $0

    Exp./Loss = $6,000 as there is a loss of $6,000 by deducting the $32,000 from the $38,000

    Net inc. = - $6,000

    Cash flow = $32,000 IA. The sale value of the machinery is shown in the investing activity as a cash inflow
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