Question

If assets total $15,000 and liabilities total $9,000, then

-Stockholders' equity totals $24,000
-Liabilities are undervalued by $6,000
-Assets are overvalued by $6,000
-Stockholders' equity totals $6,000

Answer 1

The stockholders' equity totals $6,000 when assets are $15,000 and liabilities are $9,000, as calculated by the basic accounting equation.

Step-by-step explanation:

To answer the student's question: If assets total $15,000 and liabilities total $9,000, the correct option is that the stockholders' equity totals $6,000. This is calculated using the accounting equation where Assets = Liabilities + Stockholders' Equity. Upon rearranging for equity, we subtract liabilities from assets ($15,000 - $9,000 = $6,000).

In the scenario provided, it is clear that none of the other options (Stockholders' equity totals $24,000, Liabilities are undervalued by $6,000, Assets are overvalued by $6,000) are correct because they do not reflect the proper relationship between assets, liabilities, and stockholders' equity.