Question

true or false question

true or false: when a corporation declares a dividend, its net income on the income statement is reduced.

true
false

Explanation:

Analyze the definition of net income

Net income is calculated on the income statement as revenues minus expenses. It represents the profitability of a corporation during a specific accounting period.

Analyze the effect of declaring a dividend

Dividends are a distribution of a corporation's accumulated earnings to its shareholders. When a dividend is declared, it is recorded as a reduction in retained earnings (on the balance sheet) and an increase in dividends payable (a liability), or directly as a distribution of equity.

Determine the impact on the income statement

Because dividends are a distribution of profits rather than an operating expense, they do not appear on the income statement. Therefore, declaring a dividend has no effect on net income.

Answer:

• True
• (B) False (Correct answer)