The Effect of the Declaration of a Cash Dividend by the Board

question 75

Short Answer

The effect of the declaration of a cash dividend by the board of directors is to $\begin{array}{cc}& \text { Increase }& \text {Decrease }\\a.&\text { Stockholders' equity } & \text { Assets } \\b.&\text { Assets } & \text { Liabilities } \\c.&\text { Liabilities } & \text { Stockholders' equity } \\d.&\text { Liabilities } & \text { Assets }\end{array}$

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Definitions:

Sale of Land

A transaction involving the transfer of ownership of a parcel of land from one party to another.

Unrealized Profit

Profit that has been generated on paper through an investment but has not yet been realized through the sale of that investment.

Consolidating Entries

Journal entries made in the preparation of consolidated financial statements to remove the effects of intercompany transactions among the entities within a consolidated group.

External Parties

Individuals or entities that are not part of a firm but are interested in its financial information, such as investors, creditors, or regulatory agencies.