Question

A company's total assets increased during the period while its liabilities and common stock were unchanged. No dividends were declared or paid during the period. Which of the following would explain this situation?

a. Revenues were greater than expenses during the period.
b. Retained earnings were less than net income during the period.
c. No dividends were paid during the period.
d. The company must have purchased assets with cash during the period.

Answer 1

a. Revenues were greater than expenses during the period.

Step-by-step explanation:

Since the total assets are increased but there is no changed in the common stock and the liabilities plus no dividend is declared or paid

So, the assets are increased due to the net profit and the net profit comes when the revenues are exceeded then the expenses

In mathematically,

Net profit = Revenue - expenses

So, the situation would reflect the net profit