Been There Used Furniture began operation on January 1, 2019, with an initial investment of $100,000 from each of its five stockholders. During the year, the company had net income of $200,000 and paid dividends of $50,000.
-Refer to Been There Used Furniture. The dividends for the year
A)increase the amount of capital stock reported by the company.
B)are part of the company's operating expense.
C)are reported on the Statement of Retained Earnings.
D)are reported on the Income Statement.

Question

Quizplus · Accepted Answer

Dividends are not part of operating expenses, they are distributions of profits to shareholders. Therefore, choice B is incorrect. Dividends are not reported on the income statement as they are not expenses or revenues, but rather they are reported on the statement of retained earnings. Choice A is incorrect because dividends decrease retained earnings, which in turn decreases the amount of total equity reported by the company. Thus, the correct answer is C as the statement of retained earnings is the only financial statement mentioned that reports dividends.

Been There Used Furniture Began Operation on January 1, 2019