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New Member
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Feb 18, 2006, 06:51 PM
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Liabilities question
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
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Ultra Member
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Feb 18, 2006, 07:27 PM
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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)
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New Member
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Feb 18, 2006, 07:49 PM
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Thanks for the explanation.
Dell
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New Member
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Feb 19, 2006, 05:39 AM
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 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.
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New Member
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Feb 19, 2006, 09:01 AM
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Thanks for explaining it.
Dell
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Ultra Member
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Feb 19, 2006, 12:48 PM
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 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.
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