The declaration and payment of a cash dividend
A)reduces retained earnings and increases liabilities by the amount of the dividend.
B)reduces retained earnings and increases contributed capital by the same amount.
C)reduces assets and increases liabilities by the amount of the dividend.
D)reduces both assets and retained earnings by the amount of the dividend.

Question

Quizplus · Accepted Answer

Dividends are distributions of retained earnings and therefore decrease retained earnings. The cash payment reduces assets.

The Declaration and Payment of a Cash Dividend