If total liabilities increased by $25,000 during a period of time and stockholders' equity decreased by $9,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n)
A) $34,000 decrease.
B) $16,000 decrease.
C) $16,000 increase.
D) $34,000 increase.

Question

Quizplus · Accepted Answer

The accounting equation is: Assets = Liabilities + Equity. If liabilities increase and equity decreases, then assets must increase by the same amount to keep the equation in balance. In this case, liabilities increased by $25,000 and equity decreased by $9,000, so assets must have increased by $25,000 - $9,000 = $16,000.

If Total Liabilities Increased by $25,000 During a Period of Time