Question

Total stockholders' equity representsa. a claim to specific assets contributed by the owners.b. the maximum amount that can be borrowed by the enterprise.c. a claim against a portion of the total assets of an enterprise.d. only the amount of earnings that have been retained in the business.

Answer 1

c. a claim against a portion of the total assets of an enterprise

Step-by-step explanation:

As we know that the balance sheet comprises three components which includes total assets, total liabilities and shareholder equity.

And the statement of stockholder's equity comprises common stock and retained earnings.

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

And, the ending balance of the common stock = Beginning balance of common stock + issued shares

Both the debit and credit side of the balance sheet should be equal and balanced.

So, by the above explanations the option c is correct.