Which of the following changes describes the payment of $2,000 for cash dividends?

Question

Quizplus · Accepted Answer

The payment of cash dividends decreases assets and shareholders' equity. The assets decrease because cash is leaving the company, and the shareholders' equity decreases because dividends are a distribution of profits to shareholders. Liabilities are not affected, so option C is incorrect, and option D is incorrect because assets are decreasing. Option A is incorrect because assets and liabilities should balance, and if assets increase, liabilities would need to increase as well.

Which of the Following Changes Describes the Payment of $2,000