Question

If total liabilities decreased by $30,000 and stockholders' equity decreased by $10,000 during a period of time, then total assets must change by what amount and direction during that same period?
(A) $40,000 increase
(B) $20,000 decrease
(C) $40,000 decrease
(D) $20,000 increase

Answer 1

Answer:

C) $40.000 Decrease

Explanation:

The accounting equation states that: Assets = Liabilities + Equity, so in this case the Assets must decrease in the same amount that change the other side of the equation, $40.000.