A hurricane destroyed a company's building that originally cost $1 million.Which of the following could not be true?
A)Assets remain the same,and liabilities and stockholders' equity both decrease by $1 million.
B)Assets decrease by $1 million,liabilities decrease by $1 million,and stockholders' equity is unchanged.
C)Assets,liabilities,and stockholders' equity all remain the same.
D)Assets decrease by $500,000,and liabilities decrease by $500,000.

Question

Quizplus · Accepted Answer

If the building is destroyed, the company's assets will decrease. The decrease can be offset if the company has insurance or if they receive compensation from the government. Therefore, it is not possible for the assets to remain the same while both liabilities and stockholders' equity decrease by $1 million.

A Hurricane Destroyed a Company's Building That Originally Cost $1