A corporation has paid $20,000 in cash dividends each year on its common shares. Although during year 1 the company had a cash shortage, it declared the dividend. However, it was stipulated that the $20,000 cash dividend would not be paid until year 2. This dividend will affect the year 1 Statement of Cash Flows by:

Question

Quizplus · Accepted Answer

The declaration of a dividend in one year with payment in a subsequent year does not affect the cash flow statement in the year it is declared, as cash flows are recorded when the actual cash movement occurs.

A Corporation Has Paid $20,000 in Cash Dividends Each Year