Explanation Stockholders’ equity: It represent the amount of shareholders’ right over the total assets of the company. Shareholders’ equity includes the amount of investment by the stockholders, accumulated earnings generated and retained in the business, less any dividends paid to the stockholders throughout the business period. The two primary components of shareholders’ equity are: 1. Contributed capital 2. Retained earnings Contributed capital: Contributed capital represents the actual amount invested by the shareholders of the business in common stock and/or preferred stock . Retained earnings: Retained earnings are the accumulation of earnings generated and retained in the business. Justification for incorrect options: Option a. is incorrect, because both preferred stock and common stock are sub classification of contributed capital...

3rd Edition

ISBN: 9780133791129

Author: Jane L. Reimers

Publisher: Pearson Higher Ed

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Identify the two primary components of stockholders’ equity.

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Identify the two primary components of stockholders’ equity .

Solution Summary: The author identifies the two primary components of stockholders' equity: Contributed capital and Retained earnings.

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