If during the year total assets increase by $75,000 and total liabilities decrease by $16,000,by how much did owner's equity increase/decrease?
A) $91,000 increase
B) $59,000 decrease
C) $91,000 decrease
D) $75,000 increase

Question

Quizplus · Accepted Answer

Owner's equity can be calculated using the accounting equation: 
Assets = Liabilities + Owner's Equity
If total assets increased by $75,000 and total liabilities decreased by $16,000, then:

$75,000 = $16,000 + Owner's Equity 
Owner's Equity = $75,000 - $16,000 
Owner's Equity = $59,000 increase

Therefore, the correct answer is A) $91,000 increase, because $59,000 increase in owner's equity plus a $75,000 increase in total assets is equal to a $16,000 decrease in liabilities. The increase in total assets of $75,000 is matched by a decrease in total liabilities of $16,000, leaving a net increase of $59,000 in owner's equity. Therefore, owner's equity increased by $91,000 ($59,000 + $75,000).

If During the Year Total Assets Increase by $75,000 and Total