If total assets decreased by $30,000 during a specific period and owner'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 equation for the balance sheet is Assets = Liabilities + Owner's Equity. If total assets decreased by $30,000 and owner's equity decreased by $35,000, the equation becomes Assets - $30,000 = Liabilities + (Owner's Equity - $35,000). Simplifying the equation, we get Assets - $30,000 = Liabilities - $35,000, which means that the period's change in total liabilities was actually a $5,000 decrease, not a $65,000 increase. Therefore, the answer is B.

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