Question

If total liabilities increase by $5,000 then

A. assets decrease by $5,000.
B. stockholders' equity increase by $5,000.
C. assets increase by $5,000, or stockholders' equity decrease by $5,000.
D. assets and stockholders' equity each increase by $2,500.

Answer 1

C. assets increase by $5,000, or stockholders' equity decrease by $5,000.

Step-by-step explanation:

Using Accounting Equation

Asset = Equity + Liabilities

A. -5000 +5000 ( Equation is not balanced )

B. +5000 +5000 ( Equation is not balanced )

C. +5000 +5000 ( Equation is balanced )

-5000 +5000 ( Equation is balanced )

D. +2500 +2500 +5000 ( Equation is not balanced )