If total liabilities increased by $35 000 and equity increased by $15 000 over a period,then total assets must have changed by?
A) $50 000 decrease.
B) $20 000 increase.
C) $20 000 decrease.
D) $50 000 increase.

Question

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Equity. 
If total liabilities increased by $35,000, this means that the right side of the equation increased by $35,000. 
If equity increased by $15,000, this means that the right side of the equation decreased by $15,000. 
Therefore, to maintain the equation, the left side (total assets) must increase by $20,000 ($35,000 - $15,000). 
So the correct answer is a $50,000 increase in total assets (Option D).

If Total Liabilities Increased by $35 000 and Equity Increased