Use the information given below to answer the following questions:
Retained profits of Livermore Pty Ltd at 1 July 2011 were $5500. The accounting records for year ended 30 June 2012 showed the following information:
$$\begin{array} { l r }
&\$\
\text { Revenues earned } & 35500 \
\text { Cash collected from customers } & 5700 \
\text { Expenses incurred } & 32250 \
\text { Expenses paid in cash } & 29620 \
\text { Dividends declared and paid } & 1500
\end{array}$$
-A company declares and pays an interim dividend.This transaction will:
A) decrease total assets and total shareholders' equity but have no effect on profit
B) decrease total assets,total shareholders' equity and profit
C) decrease total assets but have no effect on profit or shareholders' equity
D) none of the above.

Question

Use the information given below to answer the following questions:
Retained profits of Livermore Pty Ltd at 1 July 2011 were $5500. The accounting records for year ended 30 June 2012 showed the following information:
$$\begin{array} { l r } 
&\$\
\text { Revenues earned } & 35500 \
\text { Cash collected from customers } & 5700 \
\text { Expenses incurred } & 32250 \
\text { Expenses paid in cash } & 29620 \
\text { Dividends declared and paid } & 1500
\end{array}$$ 
-A company declares and pays an interim dividend.This transaction will:
A) decrease total assets and total shareholders' equity but have no effect on profit
B) decrease total assets,total shareholders' equity and profit
C) decrease total assets but have no effect on profit or shareholders' equity
D) none of the above.

Quizplus · Accepted Answer

Declaring and paying an interim dividend would decrease the retained profits and therefore decrease the total shareholders' equity, but it would have no effect on total assets or profit as it is a distribution of earnings that have already been earned.

Use the Information Given Below to Answer the Following Questions