Part 6 - MCQ Which of the following statements is NOT true? [1 mark]

Question

BlackTom AI · Accepted Answer

Restating the prompt helps us focus on evaluating each statement for truthfulness based on the relationships between assets, liabilities, and shareholders’ equity.
Option a: If total shareholders’ equity is 80,000 and liabilities are 20,000, then assets equal liabilities plus equity, i.e., 20,000 + 80,000 = 100,000. This matches the assertion that total assets would be 100,000, so this statement is true.
Option b: The relationship is ΔA = ΔL + ΔSE. If assets decrease by 30,000 (ΔA = -30,000) and shareholders’ equity decreases by 20,000 (ΔSE = -20,000), then ΔL = ΔA − ΔSE = (-30,000) − (-20,000) = -10,000. A decrease of 10,000 in liabilities is compatible with the given changes, so this statement is true.
Option c: Here, assets increase by 45,000 (ΔA = +45,000) and liabilities decrease by 20,000 (ΔL = -20,000). Using ΔA = ΔL + ΔSE, we get ΔSE = ΔA − ΔL = 45,000 − (-20,000) = 65,000. The statement says shareholders’ equity increases by 25,000, which contradicts the calculated 65,000 change. Since this does not align with the fundamental accounting equation, this statement is not true.
Option d: Assets decrease by 60,000 (ΔA = -60,000) and shareholders’ equity decreases by 20,000 (ΔSE = -20,000). Then ΔL = ΔA − ΔSE = (-60,000) − (-20,000) = -40,000, meaning liabilities decrease by 40,000. This is a consistent outcome with the given changes, so this statement is true.
Overall, options a, b, and d are internally consistent with the accounting equation, while option c is inconsistent because the implied change in shareholders’ equity would be 65,000, not 25,000. This discrepancy is what makes option c not true.

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Part 6 - MCQ Which of the following statements is NOT true? [1 mark]

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