If a company's balance sheet shows total assets of \$400{,}000 and total liabilities of \$150{,}000, what is the amount of shareholders' equity?

• A. \$400,000
• B. \$150,000
• C. \$550,000
• D. \$250,000

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the accounting equation, which states that Assets = Liabilities + Shareholders' Equity. This equation is fundamental to financial accounting and helps determine the relationship between these components.
2. Step 2: Rearrange the accounting equation to solve for Shareholders' Equity. Using basic algebra, the formula becomes: Shareholders' Equity = Assets - Liabilities.
3. Step 3: Identify the values provided in the problem. The total assets are \$400,000, and the total liabilities are \$150,000.
4. Step 4: Substitute the given values into the formula. Using MathML, the equation becomes: $\mathrm{Shareholders\text{'}\; Equity}=\mathrm{Assets}-\mathrm{Liabilities}$, which translates to $\mathrm{400,000}-\mathrm{150,000}$.
5. Step 5: Perform the subtraction operation to find the amount of shareholders' equity. This will give you the final value, which represents the residual interest in the company's assets after deducting liabilities.