Question

A company declared a cash dividend of $8,560 on december 5, 2015. the company made a cash dividend payment on january 8, 2016. what is the cumulative effect of the declaration and payment of the cash dividend on the company's financial statements?​

Answer 1

Provided that the company is using a calendar year in preparing their financial statements, the financial statements would be prepared at year end. Upon the declaration of the cash dividend, the company would be recognizing a liability. This would be considered as a non-adjusting event since it can be clearly concluded that the payment happened after the reporting period. This would not affect the financial statements of the year 2015.