Below is the common equity section (in millions) of Timeless Technology\'s last

Question

Below is the common equity section (in millions) of Timeless Technology's last two year-end balance sheets: 3. 2014 2013 $2,000 $1,000 2,000 2340 Common stock Retained earnings Total common equity The firm 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 2013. b. The firm issued common stock in 2014. c. The market price of the firm's stock doubled in 2014 d. The firm had positive net income in both 2013 and 2014, but its net income in 2014 was lower than it was in 2013. e. The company has more equity than debt on its balance sheet.

Explanation / Answer

b.The firm issued common stock in 2014.

Since the common stock balance in 2014 increase to $2,000 from $1,000 in 2013, it can be said that the firm issued common stock in 2014.

Since there is a decrease in retained earning from 2013 to 2014 and no dividends were paid, we can say there were no profits in 2014.(so a and d are incorrect).

We cannot comment on the debt on balance sheet from given information (so e is incorrect).

Since there is a decrease in total common equity, it cannot be said that market price of firm's stock doubled.(so c is incorrect).

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