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Suppose the assets of the Silver Lode Bank are $100,000 higher than on the previous day and its net worth is up $40,000. By how much and in what direction must its liabilities have changed from the day before

Sagot :

The liabilities must have declined by $60,000.

The accounting equation states that the assets of a company is equal the sum of the company's liabilities and net worth.

Assets = liabilities + net worth

Assets increased by $100,000 and net worth increased by $40,000. This can be put into the above equation

$100,000 = $40,000 + liabilities

$100,000 - $40,000 = liabilities

Liabilities = $60,000

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