Question

During 2019, Zensa Corporation incurred operating expenses amounting to $160,000, of which $85,000 was paid in...

During 2019, Zensa Corporation incurred operating expenses amounting to $160,000, of which $85,000 was paid in cash; the balance will be paid during 2020. Which of the following is correct for the 2019 year-end balance sheet?

Multiple Choice

A)Stockholders' equity decreases $85,000 and assets decrease $85,000.

B)Assets decrease $160,000, liabilities increase $75,000, and stockholders' equity decreases $160,000.

C)Assets decrease $160,000 and stockholders' equity decreases $160,000.

D)Stockholders' equity decreases $160,000, assets decrease $85,000, and liabilities increase $75,000.

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Answer #1

Answer: option D Stockholders equity decreases by ₹160,000 assets decrease $85000 and liabilities increase $75000

Explanation:

Operating expenses decreases the profit which ultimately effect the Stockholders equity section of balance sheet.

As the cash is being paid during the year corresponding amount of $85000 is decreased in Assets

The balance of $75000 is payable in the next year. As there is a liability to pay l there will be an increase in the liabilities

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