Indicate whether each of the following statements about equity is true or false. ________ a) Expenses decrease retained earnings.________ b) Stockholders' equity and liabilities can be viewed either as sources of assets or claims to assets of the business.________ c) Retained earnings is increased by loans received from a bank.________ d) Dividends paid to stockholders decrease common stock.________ e) Generally, assets are reported at the actual price paid for them when purchased regardless of subsequent changes in market value.

Question

What will be an ideal response?

Answer 1

a) T b) T c) F d) F e) T

Loans received from a bank increase assets and liabilities, but do not affect retained earnings. Dividends paid to stockholders decrease retained earnings, not common stock.