Final answer:
Paying salaries for the current period decreases stockholders' equity because it reduces net income and thus retained earnings, which are part of stockholders' equity. Option C
Step-by-step explanation:
Of the transactions listed, c. Paying salaries for the current period is the one that decreases stockholders' equity. Stockholders' equity represents owners' claims on the assets of a corporation. When a company pays salaries, it incurs an expense, which will reduce net income for the period, and consequently, reduces retained earnings.
Retained earnings are a component of stockholders' equity, hence decreasing the overall stockholders' equity. Other transactions, such as repaying borrowed money (a), purchasing office supplies on account (b), and purchasing supplies on account (d), affect the asset and liability side of the balance sheet but do not directly reduce stockholders' equity at the time of the transaction.
Stockholders' equity is a critical aspect of a firm's balance sheet and reflects its net worth. Repaying a bank loan affects liabilities, not equity. Purchasing items on account increases liabilities while also increasing assets, leaving equity unchanged initially. Paying salaries is effectively a transaction that reduces equity because it's an expense that decreases net income, thus impacting retained earnings negatively. Option C