During January 2022 Carey Services Inc.paid a cash dividend of $2000.This transaction

Question

Quizplus · Accepted Answer

When a company pays cash dividends, its retained earnings account decreases by the amount of the dividend. Retained earnings is a part of stockholders' equity, so reducing retained earnings decreases stockholders' equity as well. Therefore, option A is the correct answer. Option B is incorrect because paying a dividend does not increase stockholders' equity. Option C is incorrect because paying a dividend has no impact on net income. Option D is incorrect because paying a dividend is not an expense.