Question

If total liabilities decreased by $122000 and stockholders’ equity decreased by $33000 during a period of time, then total assets must change by what amount and direction during that same period?

1. $155000 increase
2. $89000 decrease
3. $155000 decrease
4. $89000 increase

Answer 1

Option (3) is correct.

Step-by-step explanation:

Given that,

Decrease in total liabilities = $122,000

Decrease in stockholders’ equity = $33,000

Accounting equation is as follows:

Total assets = Decrease in Total liabilities + Decrease in Stockholders’ equity

= $122,000 + $33,000

= $155,000 Decrease

Therefore, the total assets must be decrease by $155,000.