If total assets increase by $20,000 and total liabilities increase by $12,000, the capital will:Question 7Answera.Increase by $8,000b.Decrease by $8,000c.Decrease by $32,000d.Increase by $32,000
Question
If total assets increase by 12,000, the capital will:Question 7Answera.Increase by 8,000c.Decrease by 32,000
Solution
The answer is a. Increase by $8,000.
Here's the step by step explanation:
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Total assets increased by 20,000 in resources.
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Total liabilities increased by 12,000.
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The difference between the increase in assets and the increase in liabilities is 12,000 = $8,000.
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This $8,000 is an increase in the company's capital. Capital, in this context, refers to the difference between a company's assets and its liabilities. If assets increase more than liabilities, capital increases. If liabilities increase more than assets, capital decreases.
So, in this case, the capital will increase by $8,000.
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