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

Question

Quizplus · Accepted Answer

Declaring and paying a cash dividend decreases total assets (cash or cash equivalents go out) and decreases shareholders' equity (retained earnings are reduced).

The Cumulative Effect of the Declaration and Payment of a Cash