A firm's dividends payable account increased $10,000 during the year. The firm also declared $35,000 of dividends. What is the complete disclosure in the direct method Statement of Cash Flows for these events?

Question

Quizplus · Accepted Answer

The correct disclosure in the direct method Statement of Cash Flows for these events is a $25,000 financing cash outflow. This is because the firm declared $35,000 of dividends but the dividends payable account increased by $10,000, indicating that only $25,000 ($35,000 - $10,000) was actually paid out in cash.

A Firm's Dividends Payable Account Increased $10,000 During the Year