On 1 January 2026, Jim’s Musical Instruments had Assets of $200 000 and Owner's Equity of $80 000.On 2 January 2026 the owner withdrew inventory of $1 000. What would Assets equal after this transaction?

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Initial setup: on 1 January 2026, Assets are 200,000 and Owner's Equity is 80,000. This implies Liabilities = Assets − Equity = 200,000 − 80,000 = 120,000.

Option a: 201,000 would require an increase in assets by 1,000. Since the only transaction described is a withdrawal by the owner of inventory (not an addition to assets), this option is inconsistent with the event.

Option b: 200,000 would indicate no change in total assets from the starting point. However, there is a withdrawal of inventory by the owner, which reduces assets, so this option does not reflect the transaction.

Option c: 199,000 aligns with the effect of a 1,000 withdrawal of inventory. When the owner withdraws inventory, both assets and owner’s equity decrease by 1,000 (inventory is moved out of the business for personal use), so Assets drop from 200,000 to 199,000 and Equity drops from 80,000 to 79,000.

Option d: 79,000 would represent a decrease in equity to 79,000 while assets stay or change in a way that isn’t consistent with the described transaction. The scenario preserves asset value at 199,000 after the withdrawal, not 79,000.

Therefore, the transaction reduces assets by 1,000, yielding 199,000, and reduces owner's equity by 1,000 as well, which matches option c's amount for assets (199,000).

MUF0021 Accounting Unit 1 - Semester 2, 2025

On 1 January 2026, Jim’s Musical Instruments had Assets of $200 000 and Owner's Equity of $80 000.On 2 January 2026 the owner withdrew inventory of $1 000. What would Assets equal after this transaction?

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