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If total assets increase by $20,000 and total liabilities increase by $12,000, the capital will:Question 5Answera.Increase by $32,000b.Decrease by $8,000c.Decrease by $32,000d.Increase by $8,000

Question

If total assets increase by 20,000andtotalliabilitiesincreaseby20,000 and total liabilities increase by 12,000, the capital will:Question 5Answera.Increase by 32,000b.Decreaseby32,000b.Decrease by 8,000c.Decrease by 32,000d.Increaseby32,000d.Increase by 8,000

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Solution

The answer is d. Increase by $8,000.

Here's the step-by-step explanation:

  1. Total assets increased by 20,000.Thismeansthecompanynowhasanadditional20,000. This means the company now has an additional 20,000 in resources.

  2. Total liabilities increased by 12,000.Thismeansthecompanynowowesanadditional12,000. This means the company now owes an additional 12,000.

  3. The difference between the increase in assets and the increase in liabilities is 20,00020,000 - 12,000 = $8,000.

  4. This difference is the increase in the company's capital. Therefore, the capital will increase by $8,000.

This problem has been solved

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