The Combined Effect of the Declaration and Payment of a Cash

question 35

Multiple Choice

The combined effect of the declaration and payment of a cash dividend on a company's financial statements is to:

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

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Definitions:

Flexible Budget

A budget that adjusts or flexes with changes in the volume or activity level of a business.

Overhead Volume Variance

The difference between the budgeted and actual overhead costs, attributable to variations in production volume.

Fixed Overhead Items

Costs that do not change with the level of production or sales over a certain range, such as rent, salaries, and insurance.