Question

On march 1, fresh corp. declared a dividend of $3,000. the record date is march 20, and the payment date is april 1. the journal entry required on april 1, will include which of the following entries?

select all that apply.
A. debit cash $3,000.
B. credit cash $3,000.
C. debit retained earnings $3,000.
D. credit dividends payable $3,000.
E. debit dividends payable $3,000.

Answer 1

The entries which will be included in the journal entry are:

B. credit cash $3,000.

E. debit dividends payable $3,000.

Step-by-step explanation:

On April 1, when Fresh Corp. makes the payment of dividends that were declared on March 1, the correct journal entries will be: a debit to the Dividends Payable account and a credit to the Cash account. These entries reflect the payment of the dividend, reducing the liabilities and cash held by the corporation.

Therefore, the entries required will be E. debit Dividends Payable $3,000 and B. credit Cash $3,000. The entry to debit Dividends Payable decreases this liability account as the obligation to pay shareholders is being fulfilled, while the credit to Cash reflects the outflow of cash from the company to the shareholders.

No entry is required to debit Retained Earnings or to credit Retained Earnings at this point, as that entry would have been made on the declaration date.

On the declaration date, Retained Earnings is reduced (debited), and Dividends Payable is increased (credited) to reflect the company's commitment to pay dividends.