Question

On January 1, 2017, total assets for Liftoff Technologies were $125,000; on December 31, 2017, total assets were $145,000. On January 1, 2017, total liabilities were $110,000; on December 31, 2017, total liabilities were $115,000. What are the amount of the change and the direction of the change in Liftoff Technologies shareholders' equity for 2017?

a) Decrease of $15,000
b) Decrease of $30,000
c) Increase of $15,000
d) Increase of $30,000

Answer 1

The change in Liftoff Technologies shareholders' equity for 2017 is an increase of $15,000, determined by comparing the increase in assets with the increase in liabilities over the year.

Step-by-step explanation:

To calculate the change in shareholder's equity for Liftoff Technologies in 2017, we need to review the changes in assets and liabilities between the start and end of the year. Based on the accounting equation (Assets = Liabilities + Shareholders' Equity), we can determine the change in equity by examining the changes in assets and liabilities.

On January 1, 2017, Liftoff had assets of $125,000 and liabilities of $110,000. By December 31, 2017, Liftoff's assets increased to $145,000, and liabilities increased to $115,000.

The change in assets is $145,000 - $125,000 = $20,000 increase. The change in liabilities is $115,000 - $110,000 = $5,000 increase. Therefore, the change in equity is the difference between the change in assets and the change in liabilities, which is $20,000 - $5,000 = $15,000 increase.

The amount and direction of the change in Liftoff Technologies shareholders' equity for 2017 is an increase of $15,000.