Use this information to answer the following question. Here is the balance sheet for Costello Container Company:
If the balance in the Cash account were used to pay part of Accounts Payable,then total liabilities and owner's equity would
A)decrease by $8,000.
B)increase by $8,000.
C)increase by $16,000.
D)decrease by $16,000.

Question

Use this information to answer the following question. Here is the balance sheet for Costello Container Company:
 If the balance in the Cash account were used to pay part of Accounts Payable,then total liabilities and owner's equity would
A)decrease by $8,000. 
B)increase by $8,000. 
C)increase by $16,000. 
D)decrease by $16,000.

Quizplus · Accepted Answer

If the balance in the Cash account were used to pay part of Accounts Payable, then the Cash account would decrease by $8,000 and the Accounts Payable account would also decrease by $8,000. This would result in a decrease in total liabilities and owner's equity of $8,000, since both of these categories include the amount of Accounts Payable. Therefore, the correct answer is A – decrease by $8,000.

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