If a company pays dividends of $10,000,

A) net income will be reduced by $10,000.

B) Retained earnings will be reduced by $10,000.

C) Stockholders' equity will be reduced by $10,000.

D) Both retained earnings and stockholders' equity will be reduced by $10,000.

Question

Business

Whitney Singleton

9 July, 10:23

If a company pays dividends of $10,000,

A) net income will be reduced by $10,000.

B) Retained earnings will be reduced by $10,000.

C) Stockholders' equity will be reduced by $10,000.

D) Both retained earnings and stockholders' equity will be reduced by $10,000.

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Answers (1)

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Derrick Galvan · Answer 1

D) Both retained earnings and stockholders' equity will be reduced by $10,000.

Explanation:

Dividend paid is usually deducted from the retained earnings. The retained earnings is the accumulated balance in the company's net income/loss over time shown in the balance sheet as a part of the owners equity.

The other part being the common stock.

Hence when dividend is paid, the retained earnings reduces and so does the shareholder's equity.

If a company pays dividends of $10,000,A) net income will be reduced by $10,000.B) Retained earnings will be reduced by $10,000.C) Stockholders' equity will be reduced by $10,000.D) Both retained earnings and stockholders' equity will be reduced by $10,000.

If a company pays dividends of $10,000,

A) net income will be reduced by $10,000.

B) Retained earnings will be reduced by $10,000.

C) Stockholders' equity will be reduced by $10,000.

D) Both retained earnings and stockholders' equity will be reduced by $10,000.