If assets increase $120,000 during a given period and liabilities decrease $25,000 during the same period,shareholders' equity must:
A) increase $95,000
B) decrease $145,000
C) decrease $95,000
D) increase $145,000

Question

Quizplus · Accepted Answer

Shareholders' equity is calculated as Assets minus Liabilities. If assets increase by $120,000 and liabilities decrease by $25,000, the net effect is an increase in shareholders' equity by $145,000 ($120,000 + $25,000).

If Assets Increase $120,000 During a Given Period and Liabilities