A corporation declares $25 million in net income,$1 million in preferred stock dividends,and $7 million in common stock dividends.By how much will shareholders' equity increase on the balance sheet?
A) $17 million
B) $18 million
C) $19 million
D) $25 million

Question

Quizplus · Accepted Answer

Shareholders' equity increases by the net income minus the preferred stock dividends, which is $25 million - $1 million = $24 million. However, the common stock dividends do not affect the increase in equity as they are a distribution of earnings. Therefore, the increase is $24 million - $7 million = $17 million.

A Corporation Declares $25 Million in Net Income,$1 Million in Preferred