Question

Mountain Ski Resort had the following transactions for the month of January 2020:

1. Owner invested $5,000.
2. Purchased a snow-grooming machine for $28,000 (50% on account).
3. Paid $62,700 in salaries and wages.
4. Sold $19,250 in their restaurant.
5. Sold $34,100 in their gift shop.
6. Sold $47,800 in hotel room rentals.

If the company’s assets increased by $12,000 in January, what is the net change in the company’s liabilities for January?

a. Increase by $27,450

b. increase by $5,450

c.decrease by $17,450

d.decrease by $31,450

Answer 1

Calculate effect on Stockholder's equity

Owner invested	5000
Salaries and wages	-62700
Sales (19250+34100+47800)	101150
Net effect on Stockholder's equity	43450 Increase

Assets increase 12000; Stockholder's equity 43450 Increase ; Liabilities decrease (43450-12000) = 31450

So answer is d) Decrease by $31450