A company began the year with assets of $100,000 and liabilities of $75,000.During the year assets increased by $12,000 and liabilities decreased by $9,000.
-Use the information above to answer the following question.What is the amount of the change in stockholders' equity during the year?

Question

Quizplus · Accepted Answer

To calculate the change in stockholders' equity, we need to use the accounting equation:

Stockholders' Equity = Assets - Liabilities

At the beginning of the year, stockholders' equity was:

$100,000 - $75,000 = $25,000

At the end of the year, assets increased by $12,000 and liabilities decreased by $9,000. So, the new amounts of assets and liabilities are:

Assets = $100,000 + $12,000 = $112,000
Liabilities = $75,000 - $9,000 = $66,000

Using the accounting equation, we can calculate the new stockholders' equity as:

Stockholders' Equity = Assets - Liabilities
Stockholders' Equity = $112,000 - $66,000
Stockholders' Equity = $46,000

Therefore, the change in stockholders' equity during the year is:

New Stockholders' Equity - Beginning Stockholders' Equity
$46,000 - $25,000 = $21,000 increase.

Option B is correct,  $21,000 increase.

A Company Began the Year with Assets of $100,000 and Liabilities