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If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have____________.
a. Decreased $105,000.b. Decreased $45,000.c. Increased $30,000.d. Increased $45,000.e. Increased $105,000.

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Answer:

The answer is D. The asset of the business must have increased $45,000

Explanation:

Accounting equation:

Equity = Asset - Liability

OR

Asset = Equity + Liability.

In general, total assets must always be equal to the addition of equity and Liability.

The total liability increased by $75,000 and the equity decreased by $30,000.

Asset = Equity + liability

Asset = - $30,000 + $75,000

Asset = $45,000 (+$45,000)

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