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What would be the change to the total value of liability

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Reference no: EM132823962

Consider the following worksheet with information extracted from a financial statement:

2020               

                             Assets             Liabilities            Equity

Reported ($)       500 000             100 000             400 000

Problem 1: You believe the firm has omitted a provision pertaining to a lawsuit. You assess this provision is valued at $50 000 and that it will be paid in the next six months. Using the worksheet approach and assuming a corporate tax rate of 30 per cent, what would be the change to the total value of the liability account?

Option 1: An increase of $35 000
Option 2: A decrease of $65 000
Option 3: An increase of $65 000
Option 4: A decrease of $35 000

Reference no: EM132823962

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