if assets increase by $5,000 and liabilities increase by $2,000, how much must owner’s equity change…
if assets increase by $5,000 and liabilities increase by $2,000, how much must owner’s equity change? +$3,000 +$7,000 -$2,000 0
Answer
Explanation:
Step1: Recall accounting equation
Assets = Liabilities + Owner's Equity.
Step2: Let the change in assets be $\Delta A$, change in liabilities be $\Delta L$ and change in owner's equity be $\Delta E$. So $\Delta A=\Delta L+\Delta E$.
We know $\Delta A = 5000$ and $\Delta L=2000$.
Step3: Solve for $\Delta E$
$\Delta E=\Delta A - \Delta L$. Substitute values: $\Delta E=5000 - 2000$. $\Delta E = 3000$.
Answer:
+$$3,000$