Owners of Tri-States Industries,Ralph and Maureen,are sent a dividend check from the company.For this transaction,what is the effect on the accounting equation for Tri-States Industries?
A)Assets decrease and stockholders' equity decreases.
B)Assets increase and stockholders' equity increases.
C)Liabilities increase and stockholders' equity decreases.
D)Liabilities decrease and stockholders' equity increases.

Question

Quizplus · Accepted Answer

When a dividend check is issued, it is a distribution of profits from the company to the shareholders. This means that the company's assets decrease as cash leaves the company, and the stockholders' equity decreases because there is less money remaining in the company that belongs to the shareholders. Therefore, the effect on the accounting equation is that assets decrease and stockholders' equity decreases.

Owners of Tri-States Industries,Ralph and Maureen,are Sent a Dividend Check