Question

Sarah's Net Income for the year is $25,000. The withdrawals Sarah made during the year amounted to $30,000. Which of the following statements is true of the effect of these transactions on Sarah, Capital?

Sarah, Capital account decreases by $25,000.
Sarah, Capital account decreases by $5,000.
Sarah, Capital account increases by $30,000.
Sarah, Capital account increases by $25,000.

Answer 1

Sarah's Capital account decreases by $5,000

Explanation:

Draw a number line. Sarah starts with 25,000

Then, the word withdrawals means she took out the money, so we would subtract 30,000 form her net income.

So, go back 30,000 on the number line, and you should stop at -5,000, because 30,000 is 5,00 greater than 25,000.

An easy way I like to do it is to just flip the equation and turn the answer negative.

Ex: 30,000-25,000=5,000>-5,000

Hope this helps!

Answer 2

Answer:Sarah,Capital account decreases by 5,000

Step-by-step explanation: 25,000-30,00= -5,000