The 2015 statement of cash flows of Dickens Corporation shows $500,000 cash paid for dividends.If dividends in Dickens' statement of retained earnings are reported at $550,000 then:
A)Dickens' dividends payable account must amount to $50,000 at the end of 2015.
B)Dickens' Cash account must have increased by $50,000 in 2015.
C)Dickens' dividends payable account must have increased by $50,000 in 2015.
D)Dickens' dividends payable account must have decreased by $50,000 in 2015.

Question

Quizplus · Accepted Answer

The statement of retained earnings shows the change in the retained earnings balance, which includes dividends paid to shareholders. The statement of cash flows shows the actual cash outflows for dividends. The difference between these two amounts represents the change in the dividends payable account. In this case, since the statement of retained earnings shows dividends of $550,000 but the cash flow statement shows only $500,000 in cash paid for dividends, the dividends payable account must have increased by $50,000 during the year. Therefore, the correct answer is C.

The 2015 Statement of Cash Flows of Dickens Corporation Shows