Question

Last year the Baldwin company increased their equity. In 2019 their equity was $49,360. Last year (2020) it increased to $52,256. What are causes of change in equity? Check all that apply. Select: 3

A. A change in cash of -$3,040.

B. A change in short term debt of-$4,032.

C. Dividend payment of$7,057.

D. A change of plant and equipment of$9,580.

E. Depreciation of -$41,287

F. Profits of $11,506

G. A bond issue of$1,279.

H. Change in inventory of-$837.

I. Plant Improvements of $9,580

J. An accounts payable change of$1,657.

K. Issue and retirement of stock .

Answer 1

Solution :-

Causes of change in equity : - C Dividend payment of $7057 F. Profits of $11.506 K. Issue and retirement of stock. O Dividend payment decides the amount of retained earnings. Retained earnings = profits - Dividend Payment As the dividend payment increases, retained earnings decreases and also equity decreases. As the dividend payment decreases, retained earnings increases and also equity increases. Thus, change in equity depends upon dividend and Profits.

Issue and retirement of stock is also the cause of change in equity. Issue of stock results in the increase in equity and retirement of stock results in the decrease in equity.