Question

Below is the common equity section (in millions) of Fethe Industries' last two year-end balance sheets:

2015 2014
Common stock $2,000 $1,000
Retained earnings 2,000 2,340
Total common equity $4,000 $3,340

The company has never paid a dividend to its common stockholders. Which of the following statements is CORRECT?
a. The company's net income in 2014 was higher than in 2015.
b. The company issued common stock in 2015.
c. The market price of the company's stock doubled in 2015.
d. The company had positive net income in both 2014 and 2015, but the company's net income in 2014 was lower than it was in 2015.
e. The company has more equity than debt on its balance sheet.
b. The company issued common stock in 2015.

Answer 1

Answer:

b. The company issued common stock in 2015.

Explanation:

As we can see that the common stock is more in  2015 as compare to the 2014 year

Plus, the retained earning is got decreased by $340

If we see the options, the most appropriate option is b. as the common stock is issued in 2015 for $1,000 so it total value come for $2,000 in year 2015 and in year 2014 it is 2014

Therefore, all other options are wrong.