The net effect on the corporation's books of the declaration and payment of a cash dividend are to
A)decrease liabilities and decrease shareholders' equity.
B)increase shareholders' equity and decrease liabilities.
C)decrease assets and decrease shareholders' equity.
D)increase assets and increase shareholders' equity.

Question

Quizplus · Accepted Answer

The declaration and payment of a cash dividend result in a decrease in assets (cash is paid out to shareholders) and a decrease in shareholders' equity (retained earnings are reduced by the amount of the dividend).

The Net Effect on the Corporation's Books of the Declaration