Which of the following statements is CORRECT?
A) If a company pays more in dividends than it generates in net income,its retained earnings as reported on the balance sheet will decline from the previous year's balance.
B) Dividends paid reduce the net income that is reported on a company's income statement.
C) If a company uses some of its bank deposits to buy short-term,highly liquid marketable securities,this will cause a decline in its current assets as shown on the balance sheet.
D) If a company issues new long-term bonds during the current year,this will increase its reported current liabilities at the end of the year.
E) Accounts receivable are reported as a current liability on the balance sheet.

Question

Quizplus · Accepted Answer

If a company pays more in dividends than it generates in net income, it will have negative retained earnings, which will lead to a decline in the retained earnings balance reported on the balance sheet.

Note: 
B is incorrect because dividends paid are not an expense and do not appear on the income statement. They are reported in the statement of changes in equity. 
C is incorrect because marketable securities are classified as a current asset and purchasing them will increase a company's current assets. 
D is incorrect because issuing long-term bonds will not affect a company's current liabilities. 
E is incorrect because accounts receivable are reported as a current asset, not a liability.

Which of the Following Statements Is CORRECT