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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Effect of cash dividend, stock split, and stock dividend
Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect Ballistic Scientific Inc.'s total assets, liabilities, and stockholders' equity:

To determine

Accounting equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  Assets = Liabilities + Equity

To Indicate:

The effect of each of the given transaction on accounting equation

Explanation

The effect of each of the given transaction on accounting equation is explained as follows:

    Transaction #Assets LiabilitiesStockholder's Equity
    1Declaration of Cash dividend results in decrease of equity and increase of liability0(+)(-)
    2Payment of Cash dividend results in decrease of assets and liability

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