If liabilities increase $120,000 during a given period and shareholders' equity decreases $25,000 during the same period,assets must:
A) decrease $145,000
B) increase $145,000
C) increase $95,000
D) decrease $95,000

Question

Quizplus · Accepted Answer

According to the accounting equation (Assets = Liabilities + Shareholders' Equity), if liabilities increase by $120,000 and shareholders' equity decreases by $25,000, assets must increase by $95,000 to keep the equation balanced.

If Liabilities Increase $120,000 During a Given Period and Shareholders