Question

On May 15, the board of directors declared a cash dividend of $50,000. The date of record is June 1 and the payment date is June 20. The journal entry on June 1 would be:

A. no entry needed.
B. Debit Cash; credit Dividends Payable.
C. Debit Dividends Payable; credit Cash.
D. Debit Retained Earnings; credit Dividends Payable.

Answer 1

The correct journal entry on June 1 would be Option C: Debit Dividends Payable; credit Cash.

Step-by-step explanation:

The correct journal entry on June 1 would be Option C: Debit Dividends Payable; credit Cash.

The date of record is the date on which the company determines the shareholders who are eligible to receive the dividend payment. In this case, the date of record is June 1. By debiting the Dividends Payabale account, we are recognizing the liability to pay dividends to the shareholders. By crediting the Cash account, we are reducing the company's cash balance as a result of distributing the dividends.

Answer 2

On the date of record (June 1) for a declared dividend, no journal entry is needed since no cash exchange occurs; it is simply when the company identifies its shareholders for dividend distribution.

Step-by-step explanation:

On June 1, when the date of record for a dividend occurs, no cash has yet changed hands; it is the date when the company determines who its shareholders are for the purpose of receiving the dividend. Therefore, the correct journal entry for this date is A. no entry needed. It is on the declaration date (May 15) that the company would record a liability by debiting Retained Earnings and crediting Dividends Payable. The actual transfer of cash happens on the payment date (June 20), at which point the company would then debit Dividends Payable and credit Cash. The recognition of shareholders, called the date of record, does not involve a financial transaction, and thus does not require a journal entry.