Which of the following statements about dividends is not correct?
A)Dividends represent a sharing of corporate profits with owners.
B)Both stock dividends and cash dividends reduce Retained Earnings.
C)Cash dividends paid to stockholders reduce net income.
D)Dividends are declared at the discretion of the board of directors.

Question

Quizplus · Accepted Answer

Dividends are not an expense and do not affect net income on the income statement.Instead,dividends are a distribution of the company's prior earnings.The Dividends account is deducted from Retained Earnings when it is closed at year-end.Stock dividends are recorded by transferring an amount from Retained Earnings to contributed capital accounts.

Which of the Following Statements About Dividends Is Not Correct