Question

laker motor company declared a $600,000 dividend on december 1 that will be remitted to stockholders on december 24. the date of record is december 4. on what date will the company reduce its retained earnings account?

Answer 1

Laker Motor Company will reduce its retained earnings account on the declaration date of the dividend, which is December 1st.

Step-by-step explanation:

The company will reduce its retained earnings account on the declaration date, which is the date when the dividend is officially announced by the company's board of directors. In the scenario provided, Laker Motor Company declared a dividend on December 1st.

Therefore, the retained earnings account will be decreased on December 1st, not on the date of record (December 4th) or the payment date (December 24th). It's on the declaration date that the company will record the liability for the dividend by debiting retained earnings and crediting dividend payable in the accounting records.