If total liabilities decreased by $4,000, then
A)stockholders' equity must have decreased by $4,000.
B)assets must have decreased by $4,000, or stockholders' equity must have increased by $4,000.
C)assets and stockholders' equity each increased by $2,000.
D)assets must have increased by $4,000.

Question

Quizplus · Accepted Answer

According to the accounting equation (Assets = Liabilities + Stockholders' Equity), if liabilities decrease by $4,000, either assets must decrease by $4,000 or stockholders' equity must increase by $4,000 to keep the equation balanced.

If Total Liabilities Decreased by $4,000, Then