When cash dividends are paid,

Name: When cash dividends are paid,
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When cash dividends are paid, assets (cash) are decreased, and owners' equity (retained earnings) is also decreased. There is no effect on liabilities, so option A is incorrect. Option B is incorrect because assets and owners' equity would increase if dividends were not paid but instead reinvested in the company. Option C is incorrect because assets would decrease but owners' equity would increase.

When Cash Dividends Are Paid