Q139
Dividend declared by a company ________.
A.
may be paid in kind
B.
must be paid in cash
C.
may be paid in cash or in kind
D.
may be paid in cash only
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
Dividend declared by a company may be paid in cash only. On the date of payment, the company reverses the dividend payable with a debit entry and credits its cash account for the respective cash outflow. Cash dividends do not affect a company's income statement. However, they shrink a company's shareholders' equity and cash balance by the same amount.