During 2016, Sensa Corporation incurred operating expenses amounting to $100,000 of which $75,000 was paid in cash; the balance will be paid during 2017. Which of the following is correct for the 2016 year-end balance sheet?
A)Stockholders' equity decreases $75,000 and assets decrease $75,000.
B)Assets decrease $100,000 and stockholders' equity decreases $100,000.
C)Assets decrease $100,000, liabilities increase $25,000, and stockholders' equity decreases $100,000.
D)Stockholders' equity decreases $100,000, assets decrease $75,000, and liabilities increase $25,000.

Question

Quizplus · Accepted Answer

The operating expenses decrease stockholders' equity by $100,000. Since only $75,000 was paid in cash, assets decrease by $75,000, and the remaining $25,000 is recorded as a liability to be paid in 2017.

During 2016, Sensa Corporation Incurred Operating Expenses Amounting to $100,000