Multiple Choice
A liability for cash dividends is recorded:
27
views
12. Stockholders' Equity
Dividends and Dividend Preferences
Struggling with Financial Accounting?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
On December 12, Year 1, ABC Company declared a cash dividend of $250,000. The date of record was December 28, Year 1. The cash dividend was paid on January 5, Year 2. During which period will the dividend be included on the Statement of Retained Earnings?
A
The full amount is included in Year 1
B
The full amount is included in Year 2
C
The dividend is split between Year 1 and Year 2
D
Dividends are not included on the Statement of Retained Earnings
Verified step by step guidance1
Understand the purpose of the Statement of Retained Earnings: It shows the changes in retained earnings over a specific period, including net income and dividends declared.
Identify the key dates: The dividend was declared on December 12, Year 1, and paid on January 5, Year 2. The date of record was December 28, Year 1.
Determine when dividends affect retained earnings: Dividends are recorded as a reduction in retained earnings on the date they are declared, not when they are paid.
Apply the concept to the problem: Since the dividend was declared in Year 1, it will be included in the Statement of Retained Earnings for Year 1.
Conclude: The full amount of the dividend is included in Year 1 on the Statement of Retained Earnings, as it was declared in that year.
2:47mWatch next
Master Dividend Declaration Date with a bite sized video explanation from Brian
Start learningRelated Videos
Related Practice
Dividends and Dividend Preferences practice set
Problem sets built by lead tutorsExpert video explanations