The combined effect of the declaration and payment of a cash dividend on a company's financial statements is to:
A)decrease total liabilities and decrease shareholders' equity.
B)increase total expenses and increase total liabilities.
C)increase total assets and increase shareholders' equity.
D)decrease total assets and decrease shareholders' equity.

Question

Quizplus · Accepted Answer

The payment of a cash dividend decreases the company's cash balance (an asset) and its retained earnings (a component of shareholders' equity). This results in a decrease in total assets and shareholders' equity, which is reflected in the financial statements. Therefore, the correct answer is D.

The Combined Effect of the Declaration and Payment of a Cash