Terra Corporation purchased equipment with a 10-year useful life and zero residual value for $100,000. At the end of the fourth year, the equipment is exchanged for new equipment worth $110,000. Terra gets a trade-in allowance of $70,000 on the exchange, with the remaining $40,000 paid in cash. Which of the following is true of the net effect of this transaction? Assume the straight-line depreciation method is used.

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Assets decrease by $10,000

Assets increase by $10,000

Liabilities increase by $10,000

Total stockholders' equity decreases by $10,000

Total stockholders' equity increases by $10,000