If Total Liabilities Decreased by $50,000 and Stockholders' Equity Increased

question 115

Multiple Choice

If total liabilities decreased by $50,000 and stockholders' equity increased by $30,000 during a period of time, then total assets must change by what amount and direction during that same period?

• A) $80,000 decrease
• B) $20,000 decrease
• C) $20,000 increase
• D) $80,000 increase

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Definitions:

Retained Earnings

The portion of net income that is not distributed to shareholders but instead is reinvested in the business or used to pay off debt.

Net Income

Net income is the total earnings of a company after all expenses and taxes have been deducted from total revenue.

Dividends

Payments made to shareholders out of a corporation's earnings.

Shareholders

Owners of shares in a corporation, holding a portion of the company's stock and thus a claim on its assets and earnings.