The Cumulative Effect of the Declaration and Payment of a Cash

question 128

Multiple Choice

The cumulative effect of the declaration and payment of a cash dividend on a company's balance sheet is to

• A) decrease current liabilities and stockholders' equity.
• B) increase total assets and stockholders' equity.
• C) increase current liabilities and stockholders' equity.
• D) decrease stockholders' equity and total assets.

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Definitions:

Annual Interest

The amount of interest charged or earned over a year on borrowed capital or investment principal.

Present Value

The contemporary financial worth of a future sum or ongoing cash flows, evaluated at a designated rate of return.

Compounded Annually

A method of calculating interest where the interest earned each year is added to the principal, and the interest for the next year is calculated on the total amount.

Unamortized Discount

The portion of a bond discount that has not yet been charged to expense because the bond has not reached its maturity.