Total Assets, Liabilities, and Shareholders' Equity Are $6,000, $4,000, and $2,000

question 103

Essay

Total assets, liabilities, and shareholders' equity are $6,000, $4,000, and $2,000 before $1,000 is received in exchange for a $1,000 bond payable. What change occurred to liabilities? Why is there no change in shareholders' equity?

---

Definitions:

Service Hours

A measure of activity based on the number of hours of service provided, often used in calculating billing or costs in service industries.

Value-Based Pricing

A strategy of setting product prices based on the perceived value to the customer rather than the product's cost or market competition.

Useful Life

The estimated duration of time that an asset is expected to be usable for the purpose it was acquired.

Operating Costs

The expenses related to the day-to-day functioning of a business, excluding costs associated with financing and investments.