On March 1, Year 1, Gilmore Incorporated declared a cash dividend on its 1,500 outstanding shares of $50 par value, 6% preferred stock. The dividend will be paid on May 1, Year 1 to the stockholders of record as of April 1, Year 1.Which of the following reflects the financial statement effects on the May 1, Year 1 date of payment?

Question

Quizplus · Accepted Answer

On May 1, Year 1, the following financial statement effects will occur:
- A decrease in cash in the amount of $4,500 (1,500 shares x $50 par value x 6% dividend rate)
- A decrease in retained earnings in the amount of $4,500 (since this is a cash dividend payment)

On March 1, Year 1, Gilmore Incorporated Declared a Cash