Professional Documents
Culture Documents
6.) Your Business has total assets of 10M, total liabilities of 6M and total equity of 4M. This
means that out of the total 10M resources your business own, 6M were provided by you.
Is the statement true or false? If false, why?
Answer = false
Explanation = The only reason why my answer is false its because there was no missing
information in the given problem, such as assets, liabilities, or equity, were given already. If
we try to subtract all of these items, the result won't be close enough to 6M, so my answer
for this problem is false because everything was already stated in the given problem.
7.) Total Asset is 10M Total Liabilities is 6M. Therefore, Total Equity is 16M.
Is the statement true or false? If false, why or by how much?
Answer = false
Explanation = The reason why my answer is false its because the given problem was solved by
adding 10M and 6M, which is incorrect because, as we have seen, the formula for calculating
total equity (E = A - L) requires us to subtract A and L in order to find the total equity.
Consequently, if we subtract them both, the correct answer would be 4M because equity is
then calculated using the formula E = A - L rather than E = A + L.