medium · Financial Accounting stockholders-equity

A firm declares a $5,000 dividend on December 1, to be paid on December 20.

What is the effect on the accounting equation on the date of declaration?

  1. Cash decreases by $5,000 and Retained Earnings decrease by that same $5,000 amount.
  2. Net income for the current period decreases by $5,000 on the income statement.
  3. Liabilities increase by $5,000 and Retained Earnings decrease by $5,000.
  4. Total assets and total stockholders' equity both remain unchanged.

Sign up free to see the explanation and track your rank →

More Financial Accounting stockholders-equity practice

KomFi: Test Prep Made Easy

KomFi: Test Prep Made Easy — free adaptive practice for GMAT, GRE, SAT, ACT, National Real Estate Exam, Investment Banking, and finance with full explanations.

KomFi Academy is free GMAT prep and personalized GMAT help built as a training platform: 75,000+ practice questions, 26,500+ flashcards, on-demand video lectures, podcasts, and 4K slide decks. Flagship tracks: Free GMAT Prep, Free GMAT Resources, National Real Estate Exam Prep, Investment Banking Prep, Finance Prep, GRE, SAT, ACT, LSAT, MCAT, Financial Accounting, Private Equity, Private Credit, and Quantitative Finance.

Free GMAT Prep & Personalized GMAT Help

What's inside

Topics

View pricing · Read testimonials