If the liabilities of a company increased $74,000 during a period of time and equity in the company decreased $19,000 during the same period,what was the effect on the assets?
A)Assets would have increased $55,000.
B)Assets would have decreased $55,000.
C)Assets would have increased $93,000.
D)Assets would have decreased $93,000.
E)None of the above.

Question

Quizplus · Accepted Answer

The Accounting Equation is Assets = Liabilities + Equity.

If the liabilities increased by $74,000 and equity decreased by $19,000, we can set up the equation as:

Assets = Liabilities + Equity
Assets = (Liabilities + $74,000) + (Equity - $19,000)
Assets = Liabilities + Equity + $55,000

Therefore, assets would have increased by $55,000.

If the Liabilities of a Company Increased $74,000 During a Period