Question

Which statement best represents the relationship between date of declaration, date of record and ex-dividend date, and date of payment, for a cash dividend.
A. The date of payment results in the biggest decrease in the current ratio.
B. The ex-dividend date establishes the decrease to cash.
C. The date of record establishes the amount to be received.
D. The date of declaration establishes the increase to liabilities.

Answer 1

Answer: D. The date of declaration establishes the increase to liabilities.

Explanation:

The statement that best represents the relationship that exist between the date of declaration, the date of record and ex-dividend date, and the date of payment for a cash dividend is that the date of declaration helps in establishing the increase to liabilities.

On the declaration date, it should be noted that the board of directors will declares that the shareholders will be paid dividend on a specific future date. Then, the corporation will then becomes legally liable for the payment of the dividend on the declaration date.