Assuming that capital stock increased $5,000, net income was $100,000, and dividends were $120,000, if total assets increased by $25,000, what was the change in liabilities?

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The increase in total assets of $25,000 can be accounted for by the increase in capital stock of $5,000 and net income of $100,000. Dividends of $120,000 were paid, which exceeds net income, and therefore results in a decrease in retained earnings (i.e. a decrease in shareholders' equity). Since assets increased by $25,000 and equity decreased by $20,000, the change in liabilities must be an increase of $5,000 ($25,000 - $20,000 = $5,000). Therefore, liabilities increased $5,000.

Assuming That Capital Stock Increased $5,000, Net Income Was $100,000