If, during an accounting period, assets increased by $80,000. And owner's equity decreased by $15,000, what change occurred to the total liabilities?

I answered a decreased o f$65,000. But I'm not sure

Help please.

Dell

Note:
Assets = Liabilities + Owner's Equity

Fiscal 2004:
100 = 40 + 60

Fiscal 2005:
180 = ? + 45
Therefore, =Liabilities = 135.

135 is an increase of 95,000 from the previous year.

Therefore, the answer is liabilities increased by $95,000 (if assets go up by 80, and equity is down by 15, liabilities have to go up by 80+15)

Thanks for the explanation.

Dell

Quote:

---

Originally Posted by Dell

If, during an accounting period, assets increased by $80,000. and owner's equity decreased by $15,000, what change occurred to the total liabilities?

I answered a decreased o f$65,000. but I'm not sure

Help please.

Dell

---

A=L+OE

$80,000=?+$15,000

$80,000-$15,000= $65,000. That means Liabilities increased by $65,000. I don't know where Captain Forest got his numbers? If assets increased, in this problem, then they were purchased on account, and therefore liabilities are increased.

Thanks for explaining it.

Dell

Quote:

---

Originally Posted by mh34

A=L+OE

$80,000=?+$15,000

$80,000-$15,000= $65,000. That means Liabilities increased by $65,000. I don't know where Captain Forest got his numbers? If assets increased, in this problem, then they were purchased on account, and therefore liabilities are increased.

---

Mh34, you are incorrect.

The answer is liabilities increased by $95,000

Let me try to explain this conceptually:

Assets = Liabilities + Owner's Equity

If Assets INCREASES by 80,000, then (Liabilities + Owner's Equity) must increase by $80,000

Agree?



So If owner's equity DECREASES by 15,000, then liabilities must increase by 95,000 so that (Liabilities + Owner's Equity) increases by 80,000

(Liabilities + Owner's Equity)
95,000 – 15,000 = 80,000

Therefore, liabilities MUST increase by 95,000 in this example.