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.

-How will the entry to record the declaration of the dividend on March 1 affect the elements of the financial statements?

Question

-How will the entry to record the declaration of the dividend on March 1 affect the elements of the financial statements?

Quizplus · Accepted Answer

Dividends declared = Par value of $50 per share × 6% × 1,500 Outstanding shares = $4,500
The declaration will increase liabilities (dividends payable)and decrease stockholders' equity (retained earnings)by $4,500.Since cash has not yet been paid to the stockholders,there is no effect on the statement of cash flows.

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