If total liabilities increased by $18,000 and shareholders' equity increased by $21,000 during a period of time, then total assets must change by what amount and direction (increase or decrease) during that same period?
A)$18,000 increase
B)$21,000 increase
C)$39,000 decrease
D)$39,000 increase

Question

Quizplus · Accepted Answer

The accounting equation states that Assets = Liabilities + Shareholders' Equity. If liabilities increase by $18,000 and shareholders' equity increases by $21,000, the total increase on the right side of the equation is $39,000. Therefore, assets must also increase by $39,000 to keep the equation balanced.

If Total Liabilities Increased by $18,000 and Shareholders' Equity Increased