If total assets decreased by $30,000 during a specific period and stockholder's equity decreased by $35,000 during the same period, the period's change in total liabilities was an $65,000 increase.

Question

Quizplus · Accepted Answer

The total change in liabilities can be calculated using the accounting equation: Assets = Liabilities + Stockholder's Equity. Rearranging the equation, we get Liabilities = Assets - Stockholder's Equity.

In this case, assets decreased by $30,000 and stockholder's equity decreased by $35,000. Therefore, Liabilities = $30,000 - (-$35,000) = $30,000 + $35,000 = $65,000.

However, the question asks for the period's change in total liabilities, not the total amount of liabilities. Since the liabilities increased by $65,000, the change in total liabilities would be a $65,000 increase, not a decrease. Therefore, the correct answer is B) False.

If Total Assets Decreased by $30,000 During a Specific Period