Answer:
A decrease in total liabilities combined with an increase in stockholders' equity improves a company's financial health and reflects a reduction in debt along with an increase in ownership value. In accounting, this affects the balance sheet while maintaining the fundamental equation where Assets equal Liabilities plus Equity.
Step-by-step explanation:
When looking at the changes in the balance sheet of a company, such as Singleton Bank, a decrease in total liabilities by $75,000 indicates that the company has paid off some of its obligations, reducing what it owes. On the other hand, an increase in stockholders' equity by $15,000 can result from retained earnings or additional investments from shareholders. This reflects positively on the company's financial health as it suggests the company is able to both decrease its obligations and increase its ownership value.
For instance, in the provided balance sheet situation, we have assets comprising reserves of $30, bonds worth $50, and loans amounting to $50. The liabilities include deposits of $300, with the equity standing at $30. To maintain the accounting equation (Assets = Liabilities + Equity), if the total liabilities decrease and stockholders' equity increases, it would usually mean that overall assets have decreased by a net amount of $60,000, assuming no other transactions have occurred that would affect the balance sheet.