Question

Determining Cash Payments to Stockholders

The board of directors declared cash dividends totaling $112,300 during the current year. The comparative balance sheet indicates dividends payable of $31,400 at the beginning of the year and $28,300 at the end of the year.

What was the amount of cash payments to stockholders during the year?

Answer 1

When the board of directors declares a cash dividend, debit the Retained Earnings account and credit the Dividends Payable account, thereby reducing equity and increasing liabilities.

When a dividend is eventually paid out, debit the Dividends Payable account and credit the Cash account, thereby reducing both cash and the offsetting liability.

In the Given Case-

Dividend Payable at the Bigining of the Year =

Add: Dividend Declared during the year =

Less: Dividend Payable at the end of the year =

Cash Dividend Paid During the year =

Note-

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