Land was originally purchased for 20000 It is sold for 20000

Land was originally purchased for $20,000. It is sold for $20,000 in cash. How does the sale affect the accounting equation? Assets increase by $20,000; assets decrease by $20,000. Assets increase by $20,000; liabilities decrease by $20,000. Assets increase by S20,000; equity increases by $20,000. Assets increase by $20,000; liabilities increase by $20,000.

Solution

Answer

1. Asset increases by $20,000, Asset decreases by $20,000

As land was sold for cash, so Asset(Cash) increases and as land was sold so Asset(Land) decreased.

2. True

Statement of Owners equity shows how much of the profit we kept in the business and how much is reinvested in the business