Question

A cash dividend becomes a legal liability of the corporation on the:

a) date of declaration
b) date of record
c) date of distribution
d) date of payment

Answer 1

A cash dividend becomes a legal liability of the corporation on the date of declaration, which is when the dividend is formally authorized by the board of directors.

Step-by-step explanation:

A cash dividend becomes a legal liability of the corporation on the date of declaration. This is the date when the board of directors formally authorizes the dividend and announces it to shareholders. At this point, the company is legally obligated to make the payment to shareholders, and it records a liability on its financial statements. The date of record is when the corporation determines who the shareholders are that will receive the dividend, while the date of distribution is the day the dividend is actually paid out. The date of payment is simply when the payment occurs but does not change the company's legal obligation that was established on the date of declaration.