Liquidating Dividends

B

The cash dividend account is not affected, and they would not likely occur when making an acquisition.

Liquidating dividends refer to distributions made by a company to its shareholders when it is in the process of winding down its operations and ultimately ceasing to exist. These dividends are different from regular dividends, which are typically paid out of a company's earnings as a way to distribute profits to shareholders. Here's a detailed explanation of each answer choice:

A. All of these answers: This answer choice implies that all of the following options are true, which means that each statement is correct. We will evaluate each statement individually to confirm their accuracy.

B. These dividends return part of the original investment to the stockholders: This statement is correct. Liquidating dividends are usually paid to shareholders as a way to return a portion of their initial investment in the company. Since the company is in the process of liquidation, it may not have sufficient assets to repay the entire investment, so shareholders receive a portion of their investment back through these dividends.

C. The cash dividend account is closed to retained earnings: This statement is correct. When a company pays out regular dividends, the amount is typically recorded in a cash dividend account in the company's books. However, in the case of liquidating dividends, the cash dividend account is closed, meaning it is no longer active, and the remaining balance is transferred to the retained earnings account. Retained earnings represent the accumulated profits of a company that have not been distributed to shareholders as dividends.

D. They only occur when the company is making a major acquisition: This statement is incorrect. Liquidating dividends are not specifically tied to a major acquisition. Instead, they are associated with the winding down and liquidation of a company's operations, often due to financial distress, bankruptcy, or other reasons that result in the cessation of business activities.

In conclusion, the correct answer is A. All of these answers, as all of the statements provided are accurate, except for option D, which is incorrect.