Indicate the respective effects of the declaration of a cash dividend on the following sections of the statement of financial position: Group of answer choices Increase Total Assets; Decrease Total Liabilities; No change in Total Equity No change in Total Assets; Increase Total Liabilities; Decrease Total Equity Decrease Total Assets; No change in Total Liabilities; Increase Total Equity Decrease Total Assets; Increase Total Liabilities; Decrease Total Equity
Question
Indicate the respective effects of the declaration of a cash dividend on the following sections of the statement of financial position: Group of answer choices
Increase Total Assets; Decrease Total Liabilities; No change in Total Equity
No change in Total Assets; Increase Total Liabilities; Decrease Total Equity
Decrease Total Assets; No change in Total Liabilities; Increase Total Equity
Decrease Total Assets; Increase Total Liabilities; Decrease Total Equity
Solution
The declaration of a cash dividend has the following effects on the statement of financial position:
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Decrease in Total Assets: When a cash dividend is declared, the company's cash account, an asset, decreases because the company is distributing cash to its shareholders.
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No change in Total Liabilities: The declaration of a cash dividend does not affect the company's liabilities. Liabilities would only change if the company borrows money to pay the dividend.
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Decrease in Total Equity: The declaration of a cash dividend decreases the company's retained earnings, which is a component of shareholders' equity. This is because the company is distributing its earnings back to its
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