Question

Mune company recorded journal entries for the declaration of $150,000 of dividends, the $96,000 increase in accounts receivable for services rendered, and the purchase of equipment for $63,000. What net effect do these entries have on owners' equity? a. decrease of $213,000. b. decrease of $117,000. c. decrease of $54,000. d. increase of $33,000.

Answer 1

Calculation of effect of transactions on owners' equity:

The declaration of $150,000 of dividends shall decrease the owners' equity.

The $96,000 increase in accounts receivable for services rendered shall increase the owners' equity due to increase in Revenues.

And there shall be no effect of purchase of equipment for $63,000 on the owners' equity.

Hence the net effect on owners' equity shall be  = 96000-150000 = -$54,000 or Decrease of $54,000

Hence the correct answer is;

c. decrease of $54,000.