The 2014 Statement of Cash Flows of Dickens Corporation Shows

question 88

Multiple Choice

The 2014 statement of cash flows of Dickens Corporation shows $500,000 cash paid for dividends. If dividends in Hemingway's statement of retained earnings are reported at $550,000 then:

• A) Dickens' dividends payable must amount to $50,000 at the end of 2014
• B) Dickens' Cash account must have increased by $50,000 in 2014
• C) Dickens' dividends payable must have increased by $50,000 in 2014.
• D) Dickens' dividends payable must have decreased by $50,000 in 2014

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Definitions:

Effective-Interest Method

A method of calculating the interest expense on a bond or loan by applying the constant interest rate to the outstanding balance of the debt for each period.

Bond Discount

The discrepancy between a bond's nominal value and its market price when it is traded at a price below its nominal value.

Expense Recognition Principle

An accounting guideline that dictates expenses to be recorded in the period they are incurred to generate revenue, ensuring accurate financial statements.

Historical Cost Principle

An accounting principle that states all assets should be recorded and accounted for based on their original purchase cost.