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26 July, 05:44

If total assets decreased by $47,000 during a period of time and owner's equity increased by $24,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is:

a. $23,000 increase

b. $47,000 decrease

c. $71,000 decrease

d. $71,000 increase

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Answers (1)
  1. 26 July, 09:09
    0
    The correct answer is C

    Explanation:

    The change in total liabilities is computed using the Accounting Equation as:

    Accounting Equation of the Accounts is as:

    Assets = Liabilities + Equity

    where

    The assets decrease by $47,000. So, it will negative

    The equity increased by $24,000. So, it will be positive

    So,

    Putting the values above:

    ($47,000) = Liabilities + $24,000

    ($47,000) - $24,00 = Liabilities

    Liabilities = - $71,000

    Therefore, there is decrease in liabilities by the amount of $71,000
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