Which of the following causes a net change in cash?
A) Write-off of a bad debt
B) Payment of a long-term debt by issuing common shares
C) Declaration of a cash dividend
D) Declaration and issuance of a stock dividend
E) Payment of a cash dividend declared in a previous period

Question

Quizplus · Accepted Answer

Payment of a cash dividend declared in a previous period results in a net change in cash as cash is going out of the company's account to pay shareholders. The other options do not result in a net change in cash. A write-off of a bad debt decreases accounts receivable and increases the allowance for doubtful accounts, but there is no cash inflow or outflow. Payment of a long-term debt by issuing common shares would result in an increase in equity and decrease in liabilities, but there is no net cash inflow or outflow. Declaration of a cash dividend and declaration and issuance of a stock dividend do not result in a net change in cash as no cash is going out of the company's account.

Which of the Following Causes a Net Change in Cash