Question

If, during the year, total liabilities increased by $95,000 and total stockholders' equity decreased by $75,000, what is the amount of total assets at the end of the year?

Answer 1

Answer:

Total Assets at the end of the year increased by 20.000.

Explanation:

The accounting equation said:

Equity = Total Assets - Total Liabilities

It means that the difference between Assets and Liabilities must be cover with Equity, the movements during the year in Liabilities and Equity must be reflected ni the Total Assets, that is why we have to increase Assets by 20.000 so the equation keep it validity