If the company pays the fixed dividend on the preferred stock, the transaction will:
A) decrease Preferred stock by $20,000.
B) decrease Retained earnings by $600,000.
C) decrease Cash by $20,000.
D) increase Liabilities by $20,000.

Question

Quizplus · Accepted Answer

Paying the fixed dividend on the preferred stock will decrease Cash by the amount of the dividend payment. None of the other options are affected by paying the dividend. Preferred stock and retained earnings are not affected by the payment of dividends. Liabilities are also not affected, as the preferred stock is already issued and classified as a liability on the balance sheet.

If the Company Pays the Fixed Dividend on the Preferred