If total liabilities increased by $25,000 and shareholders' equity increased by $5,000 during a period of time, then total assets must change by what amount and direction (increase or decrease) during that same period?
A)$20,000 decrease
B)$20,000 increase
C)$25,000 increase
D)$30,000 increase

Question

Quizplus · Accepted Answer

According to the accounting equation, Assets = Liabilities + Shareholders' Equity. If liabilities increase by $25,000 and equity increases by $5,000, then assets must increase by $30,000 to keep the equation balanced.

If Total Liabilities Increased by $25,000 and Shareholders' Equity Increased