Question

If assets have decreased by $4,000, or stockholders' equity has increased by $4,000, then total liabilities must have A : increased by $2,000. B : increased by $4,000. C : decreased by $4,000. D : decreased by $2,000.

Answer 1

Answer:

C : decreased by $4,000

Explanation:

As we know that

The accounting equation is

Total assets = Total liabilities + stockholder equity

To balance the balance sheet we use the accounting equation

That means the total assets is equal to the sum of the total liabilities and the stockholder equity

Since in the given situation, the assets decreased by $4,000 or if the stockholder equity has increased by $4,000 so the total assets must also decreased by $4,000 itself