Illinois Company experienced an accounting event that affected its financial statements as indicated below: Which of the following accounting events could have caused these effects on the company's financial statements?
A) paid a cash dividend
B) earned cash revenue
C) borrowed money from a bank
D) none of these

Question

Illinois Company experienced an accounting event that affected its financial statements as indicated below:  Which of the following accounting events could have caused these effects on the company's financial statements?
A) paid a cash dividend 
B) earned cash revenue 
C) borrowed money from a bank 
D) none of these

Quizplus · Accepted Answer

The reduction in retained earnings indicates that the company paid out some of its profits as dividends to its shareholders. This would cause a decrease in both the retained earnings and the total equity on the balance sheet, which is consistent with the effects observed on the financial statements.

Illinois Company Experienced an Accounting Event That Affected Its Financial