Question

The board of directors of Nash's Trading Post, LLC declared a cash dividend of $1.00 per share on 30000 shares of common stock on July 15, 2020. The dividend is to be paid on August 15, 2020, to stockholders of record on July 31, 2020. The correct entry to be recorded on August 15, 2020, will include a debit to Cash Dividends. credit to Cash Dividends. credit to Dividends Payable. debit to Dividends Payable.

Answer 1

Answer: debit to Dividends Payable.

Step-by-step explanation:

When the dividend was declared in July 15, the dividend amount was debited to the Retained earnings to show that it was being taken from Retained earnings. It was then credited to Dividends payable to show that the company owed dividends to its shareholders.

On August 15, this liability will be paid off when the dividends are paid and so the Dividends Payable account will be debited to reflect this.