A Mining Company Declared a Liquidating Dividend

question 131

Multiple Choice

A mining company declared a liquidating dividend. The journal entry to record the declaration must include a debit to

• A) Retained Earnings.
• B) Contributed Capital.
• C) Accumulated Other Comprehensive Income.
• D) Dividend Payable.

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Definitions:

Capital Structure

The composition of a company's liabilities and shareholders' equity, detailing how a firm finances its overall operations and growth by using different sources of funds.

Cost of Equity

The rate of return that a company needs to generate in order to compensate its equity investors, taking into account the risk associated with the investment.

Market Risk Premium

Market risk premium is the expected return on an investment over the risk-free rate, representing the compensation investors require for taking on higher risk.

Dividends

Funds distributed by a company to its shareholders, typically sourced from the firm's earnings.