If total liabilities increased by $15 000 and equity decreased by $10 000 over a period,then total assets must have changed by?
A) $15 000 increase.
B) $25 000 increase.
C) $5 000 decrease.
D) $5 000 increase.

Question

Quizplus · Accepted Answer

Total assets must equal total liabilities plus equity (A = L + E). 
If liabilities increased by $15 000 and equity decreased by $10 000, the overall effect on total assets will depend on whether the change in liabilities is greater or less than the change in equity. 
Since liabilities increased by $15 000 and equity decreased by $10 000 the overall effect on total assets is a decrease of $5 000 ($15 000 - $10 000 = $5 000). Therefore, option C is the correct answer.

If Total Liabilities Increased by $15 000 and Equity Decreased