Indicate whether each of the following statements about retained earnings is true or false.a)A dividend paid to stockholders decreases retained earnings.b)Issuing common stock for cash increases retained earnings.c)The amount of net income for a period must equal retained earnings.d)The purchase of a truck decreases retained earnings.e)Net income increases retained earnings.

Question

Quizplus · Accepted Answer

b)False c)False d)False e)T
Issuing common stock for cash increases the common stock account, not retained earnings. Net income increases retained earnings, but does not necessarily equal its total. The purchase of a truck increases one asset (Truck)and decreases another asset (Cash)or increases a liability (Note Payable). Retained earnings includes all net income that a company has earned in its existence that has not been paid out in dividends.

Indicate Whether Each of the Following Statements About Retained Earnings