How to Calculate Change in Total Assets?

Question:

If total liabilities increased by $30,900 and stockholders' equity increased by $21,000 during a period of time, then total assets must change by what amount and direction during that same period?

Select answer from the options below:

• $9,900 decrease
• $51,900 decrease
• $9,900 increase
• $51,900 increase

Answer:

The total assets must increase by $51,900, according to the basic accounting equation.

The basic accounting equation is Assets = Liabilities + Shareholders' Equity. When there is an increase in both liabilities and stockholders' equity, the total assets will also increase.

In this case, the total liabilities increased by $30,900 and stockholders' equity increased by $21,000. To find the change in total assets, we need to sum up these increases.

Therefore, the change in total assets would be $30,900 (increase in liabilities) + $21,000 (increase in stockholders' equity) = $51,900. This means that the total assets have increased by $51,900 during the specified period of time.

Understanding how changes in liabilities and stockholders' equity affect total assets is crucial in analyzing a company's financial health and performance.