On May 1, 2018, Love Corporation declared a $56,900 cash dividend to be paid on May 31 to shareholders of record on May 15. Required: Record the events occurring on May 1 and May 31 in a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element was not affected by the event, leave the cell blank. (Enter any decreases to account balances with a minus sign.)

Question

Howard

Business

25 March, 04:38

On May 1, 2018, Love Corporation declared a $56,900 cash dividend to be paid on May 31 to shareholders of record on May 15. Required: Record the events occurring on May 1 and May 31 in a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element was not affected by the event, leave the cell blank. (Enter any decreases to account balances with a minus sign.)

+5

Answers (1)

Know the Answer?

Brody Lam · Answer 1

May 1st 2018

Dr Retained Earnings 56,900

Cr Dividend Payable 56,900

(to record Love Corporation's dividend declaration in May 1st 2018)

May 31st 2018

Dr Dividend Payable 56,900

Cr Cash 56,900

(to record Love Corporation's actual dividend payment in May 31st 2018)

The event in may 1st 2018 is an non-cash item thus not affected the Cash Flow statement because no dividend cash payment was made.

While the event in May 31st 2018 is recognized as a financing activity as actual cash dividend is made to shareholders.

Explanation:

Explanation is given in the Answer part.