At March 31, 2010, Gaffer's Department Store, had $1,000,000 of assets and $325,000 of liabilities. On April 10, 2010, Gaffer's paid off $125,000 of its liabilities. Total stockholders' equity at April 10, 2010, after the payment, is
A) $ 550,000.
B) $ 600,000.
C) $ 675,000.
D) $1,000,000.
E) $1,125,000.

Question

Quizplus · Accepted Answer

Stockholders' equity is calculated as assets minus liabilities. Initially, Gaffer's had $1,000,000 in assets and $325,000 in liabilities, resulting in $675,000 ($1,000,000 - $325,000) in stockholders' equity. After paying off $125,000 of its liabilities, the liabilities decrease to $200,000 ($325,000 - $125,000), but this payment does not affect the total assets or the calculation of stockholders' equity directly. Therefore, the stockholders' equity remains at $675,000.

At March 31, 2010, Gaffer's Department Store, Had $1,000,000 of Assets