In preparing a statement of changes in shareholders' equity, the company includes land given to a shareholder as a dividend. This transaction is included in the statement because it represents
A) an investment by a shareholder that increases equity.
B) an investment by a shareholder that decreases equity.
C) a distribution to a shareholder that increases equity.
D) a distribution to a shareholder that decreases equity.

Question

Quizplus · Accepted Answer

The transaction represents a distribution to a shareholder that decreases equity. When a company gives land or any other asset as a dividend to shareholders, it is distributing its assets to them, which reduces the company's equity.

In Preparing a Statement of Changes in Shareholders' Equity, the Company