A company declares and pays an interim dividend.This transaction will:
A) decrease total assets and total shareholders' equity but have no effect on profit.
B) decrease total assets,total shareholders' equity and profit.
C) decrease total assets but have no effect on profit or shareholders' equity.
D) none of the answers provided.

Question

Quizplus · Accepted Answer

When a company declares and pays an interim dividend, it results in a decrease in total assets (as cash is paid out) and a decrease in total shareholders' equity (as dividends are distributed from retained earnings), but it does not affect the company's profit, as dividends are distributions of profit, not expenses.

A Company Declares and Pays an Interim Dividend