Which one of the following will decrease the value of the owners' equity on a statement of financial position?
A) Dividends paid during the year in an amount which exceeds the net income for the year.
B) The sale of new shares of stock.
C) The purchase of new equipment using the proceeds of a bank loan.
D) The sale of inventory at a profit.
E) A decrease in the amount of long-term debt owed by a firm.

Question

Quizplus · Accepted Answer

Dividends paid in excess of the net income for the year reduce retained earnings, which is a component of owners' equity, thus decreasing the overall value of owners' equity.

Which One of the Following Will Decrease the Value of the Owners