The declaration and payment of a cash or property dividend requires:
A)the distribution of a current asset.
B)an appropriation of retained earnings.
C)a reduction of both retained earnings and assets.
D)a decrease in retained earnings and a change in contributed (paid-in)capital.

Question

Quizplus · Accepted Answer

Dividends, whether cash or property, result in a reduction of retained earnings because they are distributions of profits to shareholders. Additionally, they lead to a decrease in assets (cash or the value of the property distributed). Choices A, B, and D do not fully capture the dual impact of dividends on both retained earnings and assets.

The Declaration and Payment of a Cash or Property Dividend