The cumulative effect of the declaration and payment of a cash dividend on a company's statement of financial position is to

Question

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The declaration and payment of a cash dividend will decrease the retained earnings (which is a component of equity) of the company, resulting in a decrease in equity. As cash is distributed to the shareholders, the company's assets (in the form of cash) will also decrease, leading to a decrease in total assets. Hence, the cumulative effect will be a decrease in equity and total assets, which is represented by option D.

The Cumulative Effect of the Declaration and Payment of a Cash