Which of the following statements is CORRECT?
A)Dividends paid reduce the net income that is reported on a company's income statement.
B)If a company uses some of its bank deposits to buy short-term, highly liquid marketable securities, this will cause a decline in its current assets as shown on the balance sheet.
C)If a company issues new long-term bonds during the current year, this will increase its reported current liabilities at the end of the year.
D)Accounts receivable are reported as a current liability on the balance sheet.
E)If a company pays more in dividends than it generates in net income, its retained earnings as reported on the balance sheet will decline from the previous year's balance.

Question

Quizplus · Accepted Answer

If a company pays more in dividends than it generates in net income, its retained earnings as reported on the balance sheet will decline from the previous year's balance. This is because retained earnings represent the portion of net income that a company has not paid out as dividends, and paying out more in dividends than net income reduces the amount of retained earnings. The other statements are incorrect: A) Dividends paid do not affect net income, they are paid out of net income. B) Buying marketable securities would increase current assets. C) Issuing long-term bonds increases long-term liabilities, not current liabilities. D) Accounts receivable are reported as current assets, not current liabilities.

Which of the Following Statements Is CORRECT