Which of the following transactions is most likely to be recognized on a firm's statement of changes in equity? A) Buying a machine from an equipment dealer. B) Declaring a dividend on common shares. C) Investing cash in an exchange-traded fund.

The answer is: B) Declaring a dividend on common shares.

Explanation:

A company's statement of changes in equity shows the change in shareholder's equity throughout an accounting period. The main elements of these reports are:

Net profit or loss. A decrease or increase in share capital reserves. Dividend payments made to shareholders. Changes in accounting policy. Adjustments (corrections) of prior period errors.

Dividend payments must be deducted from shareholder equity because they are a distribution of wealth to the shareholders.