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A statement of financial position shows total assets of $60,000 and liabilities of $5,000. What is total equity?
A$55,000
B$65,000
C$60,000
D$5,000
Answer & Solution
Correct answer: A. $55,000
1. The balance sheet expands the equation $\text{Assets} = \text{Liabilities} + \text{Equity}$.
2. Rearrange: $\text{Equity} = \text{Assets} - \text{Liabilities}$.
3. Substitute: $60{,}000 - 5{,}000 = 55{,}000$.
4. Option A adds liabilities instead of subtracting; options C and D repeat input figures.
5. Therefore total equity is $55,000.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §1.7.4 "Balance Sheet", p.45_
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