Questions: A company paid a 300 cash dividend. Which of the following shows how this event will affect the company's counting equation? The letters "NA" indicate that the component of the equation is not affected. - Assets = Liabilities + Common Stock + Retained Earnings - A. (300) = NA + NA + (300) - B. (300) = (300) + NA + NA - C. 300 = NA + NA + 300 - D. (300) = NA + (300) + NA

The answer is A: (\$ 300) = NA + NA + (\$ 300).

Explanation:

• Option A: (\$ 300) = NA + NA + (\$ 300)

  • This option correctly reflects the impact of a cash dividend on the accounting equation. When a company pays a cash dividend, it reduces its assets (cash) and also reduces retained earnings, as dividends are distributed from retained earnings. Therefore, assets decrease by \$300, and retained earnings decrease by \$300, keeping the equation balanced.

• Option B: (\$ 300) = (\$ 300) + NA + NA

  • This option incorrectly suggests that liabilities decrease by \$300. However, paying a dividend does not affect liabilities; it affects retained earnings.

• Option C: \$ 300 = NA + NA + \$ 300

  • This option incorrectly shows an increase in assets and retained earnings, which is not the case when a cash dividend is paid. Both should decrease.

• Option D: (\$ 300) = NA + (\$ 300) + NA

  • This option incorrectly suggests that common stock decreases by \$300. Common stock is not affected by the payment of dividends; it is retained earnings that decrease.