With Respect to the Balance Sheet, an Increase in Equity

question 7

Multiple Choice

With respect to the balance sheet, an increase in equity of $2,000 with an increase in net income to $2,500, leads us to believe:

• A)The firm paid a dividend of $500
• B)The firm plowed $500 back into the company
• C)$500 went into retained earning
• D)Debt increased by $2,000

---

Definitions:

Balance Sheet

An account that outlines the financial position of a company, detailing its assets, liabilities, and owners' equity at a given point in time.

Income Statement

A financial statement that shows a company's revenue and expenses, and the resulting profit or loss, over a specific period.

Indirect Method

A method used in cash flow statements to adjust net income for the changes in non-cash accounts to arrive at operating cash flow.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.