Question

If total liabilities increased by $75,000 and stockholders' equity increased by $25,000 during a period, then total assets must change by what amount and direction during that same period?

a. $100,000 decrease
b. $100,000 increase
c. $125,000 increase
d. $150,000 increase

Answer 1

Total assets must have increased by $100,000, reflecting the combined increase in total liabilities and stockholders' equity during the period.

Step-by-step explanation:

If total liabilities increased by $75,000 and stockholders' equity increased by $25,000 during a period, then total assets must have increased by the sum of these two amounts. According to the accounting equation, Assets = Liabilities + Stockholders' Equity, any change in liabilities or equity must be mirrored by an equal change in assets. Therefore, the total assets must have increased by $100,000.