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. what is the journal entry required on march 20?

a. debit retained earnings $3,000.
b. credit dividends payable $3,000.
c. credit cash $3,000.
d. no entry is required.

Answer 1

No journal entry is required on March 20, the record date for Fresh Corp.'s dividend payment, because the necessary accounting event occurred on the declaration date, with another entry due on the payment date.

Step-by-step explanation:

No entry is required on March 20, which is the record date. Accounting events for dividends occur when the dividend is declared and when it is paid. On the declaration date, March 1, Fresh Corp. would make an entry to debit Retained Earnings for $3,000 and credit Dividends Payable for $3,000. No journal entry is needed on the record date because this date is simply when the company determines which shareholders are entitled to receive the dividend. Finally, on the payment date, April 1, the company will debit Dividends Payable and credit Cash for the dividend amount.

To summarize, at the record date, the crucial accounting event of recognizing the dividend liability has already taken place, and only the actual cash payout remains, which will be reflected in the accounts on the payment date.