If a transaction causes total assets of the company to increase by $5,000 and total liabilities to increase by $3,000,then stockholders' equity increases by $8,000.

Question

Quizplus · Accepted Answer

The equation should be Assets = Liabilities + Stockholders' Equity, not Assets = Liabilities + Stockholders' Equity increase. Therefore, the correct equation based on the information given should be Assets ($5,000) = Liabilities ($3,000) + Stockholders' Equity ($2,000), meaning that stockholders' equity increases by $2,000, not $8,000.

If a Transaction Causes Total Assets of the Company to Increase