How Much Cash Was Paid for Dividends During the Period?

Question:

If the opening balance of dividends payable is $120,000 and the closing balance is $90,000, and dividends declared at the end of the period are $50,000, how much cash was paid for dividends in that period?

Answer:

To calculate the cash paid for dividends during the period, subtract the closing balance of dividends payable ($90,000) from the opening balance ($120,000) and add the dividends declared ($50,000), resulting in a total cash payment of $80,000 for dividends.

Explanation: To determine how much cash was paid for dividends during the period, you need to analyze the changes in the dividends payable account and incorporate the dividends declared. To calculate the cash paid for dividends, start with the opening balance of dividends payable, which is $120,000. Then, subtract the closing balance of dividends payable, which is $90,000. Finally, add the dividends declared at the end of the period, which amounts to $50,000.

The formula to find out the cash paid for dividends during the period will therefore be:

Cash Paid for Dividends = Opening Balance of Dividends Payable – Closing Balance of Dividends Payable + Dividends Declared

This gives us:

Cash Paid for Dividends = $120,000 – $90,000 + $50,000 = $80,000

Therefore, $80,000 in cash was paid for dividends during the period.