Current Attempt in Progress

The effect on the basic accounting equation is as follows: Assets $=$ Liabilities $+$ Stockholders' Equity; $-$$$50,000=-$$$90,000+$ $$40,000.$ Stockholders' equity needs to increase by $$40,000,$ not by $$140,000.$

During $2022,$ Gibson Company's assets decreased $$50,000$ and its liabilities decreased $$90,000.$ Its stockholders' equity therefore

decreased $$140,000.$

increased $$140,000.$

decreased $$40,000.$

increased $$40,000.$