The Net Effect on the Corporation's Books of the Declaration

question 47

Multiple Choice

The net effect on the corporation's books of the declaration and payment of a cash dividend are to

• A) decrease liabilities and decrease shareholders' equity.
• B) increase shareholders' equity and decrease liabilities.
• C) decrease assets and decrease shareholders' equity.
• D) increase assets and increase shareholders' equity.

---

Definitions:

2 Years

A period of two calendar years.

Compounded Semi-Annually

Applying interest to both the initial principal and accumulated interest twice a year.

65 Years

A time period equivalent to sixty-five years, often referenced in discussions of age or time to retirement.

Common Stock

A type of security that represents ownership in a corporation and gives holders voting rights, as well as a share in the company's profits via dividends.