Question

A company’s year-end comparative statement of financial position reflects the following changes from the prior year: cash increased by $40,000, total liabilities increased by $32,000, and all other assets decreased by $65,000. Which of the following statements is correct regarding the current-year change in the company’s stockholders’ equity?

A. It increased by $25,000.
B. It increased by $105,000.
C. It decreased by $32,000.
D. It decreased by $57,000.

Answer 1

D. It decreased by $57,000.

Step-by-step explanation:

Given that

Cash increased = $40,000

Total liabilities increased = $32,000

Other asset decreased = $65,000

We know that

Total assets = Total liabilities + stockholder equity

where,

Total assets = -$65,000 + $40,000

= -$25,000

So,

-$25,000 = $32,000 + stockholder equity

So, the stockholder equity would be

= -$25,000 - $32,000

= -$57,000