5. (1 point) It is typical for the growing companies such as Amazon, Google, Twi

ID: 2561458 • Letter: 5

Question

5. (1 point) It is typical for the growing companies such as Amazon, Google, Twitter not to share their profits by distributing dividends to shareholders, as they believe that the companies have enough lucrative projects within companies to use cash Mature companies are known for regular (quarterly) distributions. Dr Pepper Snapple Group Inc. is an American soft drink company, based in Plano, Texas. On May 8, 2017, Dr Pepper Snapple Group, Inc. (NYSE: DPS). made the following announcement: "Rr Pepper Snapple Group, Inc. today announced that its Board of Directors declared a quarterly dividend of $0.58 per share on the company's common stock. The dividend is payable in U.S. dollars on July, 7 2017, to shareholders of record on June 14th, 2016." How was accounting equation will be impacted by both the dividend declaration and payment? 0 a. Assets (cash) decreased, liabilities increased, equity (retained earnings) decreased b. Assets (cash) increased, liabilities increased, equity (retained earnings) decreased C. Assets (cash) decreased, liabilities unaffected, equity (retained earnings) decreased d. Assets (cash) decreased, liabilities unaffected, equity (retained earnings) increased e. Assets (cash) decreased, liabilities unaffected, equity (retained earnings) increased 2 6. (1 point) There are number of reason, why the companies will buy back its shares. Disney Inc. bought back 74 million of shares paying $7.5 billion dollars in its 2016 accounting year. How Disney Inc. balance sheet was impacted by the common stock buy ement of Cash Stockholders' Equity nue Common Paid-inRetained stock =| ($7.5 billion ) | + ($7.5 billion) FA ($7.5 billion) FA ($7.5 billion ) |OA ($7.5 billion) FA =[$7.5 billion ) OA- nancing

Explanation / Answer

Question 5:

Dividend is the amount which is paid to the shareholders from the net income earned by the company.

If the company declares dividend, then it would pay from the retained earnings since net income earned by the company is transferred to the retained earnings account.

Hence when the dividend is declared, the following journal entry is passed:

Dividend expense Dr

Dividend payable

And when the same is paid, the following journal entry is passed:

Dividend payable Dr

Cash

Hence, as per the above, Assets (Cash) are decreased, therefore will be credited and Shareholders equity (Retained earnings) would be decreased, hence would be debited.

Therefore, Assets would decrease and liabilities would remain unaffected and equity would decrease.

The correct option is C.

Question 6:

Assets

Liabilities

Shareholder's equity

Cash

Notes payable

Common stock

Additional paid in capital

Treasury stock

($7.5 million)

$399.6

Whenever the company buys back its shares, then it would have to pay in cash, which means decrease in Assets (Cash) along with a decrease in the common stock because the company would now have lesser number of shares. Hence, in the accounting equation, cash would be reduced and common stock under the shareholders equity would also reduce.