Question

Mune company recorded journal entities for the declaration of $250,000 of dividends, the $160,000 increase in accounts receivable for services rendered, and the purchase of equipment for $105,000. What net effect do these entries have on stockholder's equity?

Answer 1

The declaration of dividends and the purchase of equipment would decrease stockholder's equity.

Step-by-step explanation:

The journal entries for the declaration of $250,000 of dividends, the $160,000 increase in accounts receivable for services rendered, and the purchase of equipment for $105,000 would have the following net effect on stockholder's equity:

1. Dividends: The declaration of $250,000 in dividends would decrease stockholder's equity.
2. Accounts Receivable: The increase in accounts receivable of $160,000 would have no effect on stockholder's equity as it represents a temporary increase in assets and liabilities.
3. Purchase of Equipment: The purchase of equipment for $105,000 would decrease stockholder's equity.

Therefore, the net effect on stockholder's equity would be a decrease due to the declaration of dividends and the purchase of equipment.