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    cluelessaccount's Avatar
    cluelessaccount Posts: 1, Reputation: 1
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    #1

    Sep 18, 2007, 09:20 AM
    Paid dividends
    A paid dividends does what?

    a)decrease assets and stockholders' equity
    b)increase assets and stockholders' equity
    c)increase assets and decrease stockholders' equity
    d)decrease assets and increase stockholders' equity

    Please help:confused:
    erofeevna's Avatar
    erofeevna Posts: 2, Reputation: 1
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    #2

    Sep 18, 2007, 04:45 PM
    I think answer is A.
    When you paid dividents you decrease asset (Cash - Credit) and decrease stockholders' equity (Divitents - Debit).
    Actually, dividents are declared on one day and paid on a later date.
    So you will have two transactions:
    1. Dividents - Debit (Stockholders' Equity)
    Dividents Payable - Credit (Liability)
    2. Dividents Payable - Debit (Liability)
    Cash - Credit (Asset)
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