Question

A company declared $500,000 of dividends that will be paid two months from now.Which of the following items would be increasedby this dividend declaration transaction? (check all thatapply)Net IncomeCurrent AssetsCash from FinancingCash from OperationsTotal LiabilitiesDividends PayableRetained EarningsDividend Expenses

Answer 1

A company declared $500,000 of dividends that will be paid two months from now. Total liabilities and dividends payable would increase.

Step-by-step explanation:

The declaration of dividend increases the total liabilities as a result of increase in current liabilities. Dividend declared is a component of current liabilities, which increases the total liabilities.

There will also be an increase in dividends payable since the dividend is declared but not paid until two months. Dividend not yet paid is a component of dividend payable, which increases the current liabilities and total liabilities of the company.