If total assets increase by $20,000 and total liabilities increase by $12,000, the capital will:Question 1Answera.Increase by $8,000b.Decrease by $32,000c.Increase by $32,000d.Decrease by $8,000
Question
If total assets increase by 12,000, the capital will:Question 1Answera.Increase by 32,000c.Increase by 8,000
Solution
The answer is a. Increase by $8,000.
Here's the step by step explanation:
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The accounting equation is Assets = Liabilities + Capital. This means that the total assets of a company are financed either by liabilities (debt) or by capital (owners' equity).
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If total assets increase by 20,000 to keep the equation balanced.
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If total liabilities increase by 8,000 must be an increase in capital to keep the equation balanced.
So, the capital will increase by $8,000.
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