On January 1, 2019, a company reported assets of $1,000,000 and liabilities of $600,000. During 2019, assets decreased by $100,000 and Stockholders' Equity decreased $200,000. What is the amount of liabilities at December 31, 2019?
A)$200,000
B)$500,000
C)$600,000
D)$700,000

Question

Quizplus · Accepted Answer

The accounting equation is Assets = Liabilities + Stockholders' Equity. Initially, Stockholders' Equity = $1,000,000 - $600,000 = $400,000. During 2019, assets decreased by $100,000, so new assets = $900,000. Stockholders' Equity decreased by $200,000, so new Stockholders' Equity = $200,000. Therefore, Liabilities = $900,000 - $200,000 = $700,000.

On January 1, 2019, a Company Reported Assets of $1,000,000