Which of the following will not cause a change in the stockholders' equity of a business?
A) An increase in prepaid expenses.
B) An increase in retained earnings.
C) The sale of common stock.
D) The declaration and payment of dividends.

Question

Quizplus · Accepted Answer

An increase in prepaid expenses does not directly affect the stockholders' equity. It only affects the current assets and liabilities of the business. The other options – B, C, and D – directly affect the stockholders' equity. A increase in retained earnings means higher profits, while the sale of common stock increases the equity capital. The declaration and payment of dividends decrease the retained earnings and thus decrease the stockholders' equity.

Which of the Following Will Not Cause a Change in the Stockholders