The Declaration and Payment of a Cash Dividend Does Which

question 101

Multiple Choice

The declaration and payment of a cash dividend does which of the following?

• A) Reduces assets and retained earnings each by the amount of the dividend.
• B) Reduces retained earnings and increases contributed capital by the same amount.
• C) Reduces assets and increases liabilities each by the amount of the dividend.
• D) Reduces retained earnings and increases liabilities by the amount of the dividend.

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Definitions:

Disposable Income

Disposable income refers to the amount of money individuals or households have available to spend or save after income taxes are deducted.

Marginal Propensity

The ratio of change in an economic variable (e.g., consumption, saving) to a change in another economic variable (e.g., income).

Disposable Income

Post-tax income that households can allocate towards savings and expenses.

Consumption Spending

The total amount of money that households spend on goods and services within a certain period.