XYZ CoPaid $1,000 in Dividends to Stockholders

question 75

Multiple Choice

XYZ Co.paid $1,000 in dividends to stockholders.How does this transaction affect the accounts of XYZ?

• A) Cash will decrease by $1,000 and retained earnings will decrease by $1,000.
• B) Cash will decrease by $1,000 and expenses will increase $1,000.
• C) Cash will decrease by $1,000 and revenues will decrease $1,000.
• D) Net income will decrease by $1,000.

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Definitions:

Red Herring

A preliminary prospectus distributed to prospective investors in a new issue of securities.

Preliminary Prospectus

An initial document provided by a securities issuer that details the investment offering for potential investors but is not yet approved by the relevant authority.

Seasoned Equity Offering (SEO)

A sale of equity shares by a company that has already gone public through an additional public offering.

Green Shoe Option

A clause contained within the underwriting agreement of an IPO that allows underwriters to purchase up to an additional 15% of shares at the offering price.