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

Jazlyn Wolf

Business

3 June, 10:20

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?

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Scooby · Answer 1

Dividend Declared (SCE) $4,500 (credit)

Shareholders for Dividends (SFP) $4,500 (credit)

Explanation:

When Dividends are declared, we recognize an Equity Element - Dividend Declared and a liability (Present Obligation that arises with declaration) to the Shareholders of the dividend.

Entry:

Dividend Declared (SCE) $4,500 (credit)

Shareholders for Dividends (SFP) $4,500 (credit)

Dividend Calculation = 1,500 * $50 * 6%

= $4,500