Question

During the current year, a company's total liabilities increased by $50,000 and total stockholders' equity decreased by $10,000. How much did its total assets increase or decrease during the current year?

Answer 1

The company's total assets increased by $40,000 during the current year.

What is the total asset?

Based on the accounting equation, the total assets are equal to the total liabilities and total equity.

When liabilities (or debts) increase by $50,000, the total assets will also increase by the same amount, in the form of cash, inventory, plant, and machinery.

When the equity decreases by $10,000, the total assets will also decrease by the same amount, in the form of either cash dividends or capital withdrawal.

Indeed, the accounting equation states that assets = liabilities + equity.

Data and Calculations:

Increase in liabilities = $50,000

Decrease in stockholders' equity = $10,000

Net increase in assets = $40,000 ($50,000 - $10,000)

Thus, the company's total assets increased by $40,000 during the current year.

Learn more about the accounting equation at https://brainly.com/question/24401217

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