Question

When preparing the balance sheet, you noticed that total liabilities have decreased by

$25,000 and owner's equity has increased by $15,000 during a period of time. What is the
change in total assets during the same period?
$10,000 increase
) $40,000 increase
C) $40,000 decrease
O
D) $10,000 decrease

Answer 1

) $40,000 increase

Step-by-step explanation:

A balance sheet shows the value and financing of a company's assets at the end of a period. It as prepared following the accounting equation of Assets = Equity + liabilities.

A decrease or increase in assets ( left side of the equation ) follows a similar increase or decrease in the right to balance the equation.

In this case, liabilities and equity have increased by $25,000 and $15,000

=$40,000

Liabilities and equity are both on the right side and have increased by $40,000; assets must have increased by $40,000.

An increase of $40,000