If total assets decreased by $47,000 during a period of time and owner's equity increased by $24,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total liabilities is ________.
$23,000 increase
$47,000 decrease
$71,000 decrease
$71,000 increase
Decrease in liabilities of $71,000
To find the change in total liabilities, we can use the accounting equation:
Total Assets = Total Liabilities + Owner's Equity
If total assets decreased by $47,000 and owner's equity increased by $24,000 during the same period, we can rearrange the equation:
Total Liabilities = Total Assets - Owner's Equity
Total Liabilities = ($47,000 decrease) - ($24,000 increase)
Total Liabilities = $23,000 decrease
Therefore, the period's change in total liabilities is a $23,000 decrease.
To determine the amount and direction of the period's change in total liabilities, we can use the accounting equation:
Assets = Liabilities + Owner's Equity
Given that total assets decreased by $47,000 and owner's equity increased by $24,000, we can calculate the change in total liabilities.
Let's assume the initial total assets were A, and the initial owner's equity was OE. The equation would be:
A - 47,000 = Liabilities + OE + 24,000
Simplifying this equation, we get:
A - 23,000 = Liabilities + OE
Now, we know that the change in total liabilities is equal to the change in assets minus the change in owner's equity:
Change in Liabilities = Change in Assets - Change in Owner's Equity
Change in Liabilities = -47,000 - 24,000
Change in Liabilities = -71,000
Since the change in liabilities is a decrease of $71,000, the amount and direction of the period's change in total liabilities is $71,000 decrease.
Therefore, the correct answer is: $71,000 decrease.