If total liabilities decreased by $50,000 and stockholders' equity increased by $10,000 during a period of time, then total assets must change by what amount and direction during that same period?
A) $40,000 decrease
B) $40,000 increase
C) $50,000 increase
D) $60,000 increase

Question

Quizplus · Accepted Answer

According to the accounting equation (Assets = Liabilities + Equity), if liabilities decrease by $50,000 and equity increases by $10,000, assets must decrease by $40,000 to keep the equation balanced.

If Total Liabilities Decreased by $50,000 and Stockholders' Equity Increased