Question

Which of the following transactions has no effect on net income?

A) declares and paid dividends

B) sold merchandise inventory on account

C) paid cash for this months utilities

D) depreciated machinery

E) All of the transactions affect net income

Answer 1

The answer is Option A: Declares and Paid Dividends

Explanation:

Dividends represent a portion of a company's net income paid to the share holders. So the declaration of dividends don't cause net income to go down. Rather, dividends are just one example of what a company might choose to do with its net income..
See the proforma of preparing an Income Statement, Here you can see that the declaration of dividend doesn’t affect the value of net income
NB: feel free to ask any doubts, Thank you

[Your Company Name] Income Statement For the Year Ended [Mmmm Dd, 200X Revenue Gross Sales Less: Sales Returns and Allowances Net Sales $0.00 $0.00 Cost of Goods Sold: $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Beginning Inventory Add: Purchases Freight-in Direct Labor Indirect Expenses Less: Ending Inventory Cost of Goods Sold $0.00 Gross Profit (Loss) $0.00 Expense:s Advertising Amortization Bad Debts Bank Charges Charitable Contributions Commissions Contract Labor Credit Card Fees Delivery Expenses Depreciation Dues and Subscriptions Insurance Interest Maintenance Miscellaneous Office Expenses Operating Supplies Payroll Taxes Permits and Licenses Postage Professional Fees Property Taxes Rent Repairs Telephone Travel Utilities Vehicle Expenses Wages Total Expenses $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Net Operating Income $0.00 Other Income Gain (Loss) on Sale of Assets Interest Income Total Other Income $0.00 $0.00 $0.00 Net Income (Loss) $0.00