Question

The board of directors of Swifty Corporation declared a cash dividend of $2.75 per share on 40000 shares of common stock on July 15, 2020. The dividend is to be paid on August 15, 2020, to stockholders of record on July 31, 2020. The effects of the journal entry to record the payment of the dividend on August 15, 2020, are to increase stockholders’ equity and decrease assets. decrease liabilities and decrease assets. increase stockholders’ equity and increase liabilities. decrease stockholders’ equity and decrease liabilities.

Answer 1

a. Decrease liabilities and decrease assets

Step-by-step explanation:

First option "Decrease liabilities and decrease assets" is the correct option as far as only payment part of Journal entry is concerned.

Since Dividend is declared on 15 July on That date entry would have been:

Shareholder's Equity........Dr

To Dividend Payable(Liability) A/c......Cr

Then, on Payment date i.e. 15 august entry would be:

Dividend Payable(Liability)A/c.......Dr

To cash/Bank A/c..........Cr

Therefore, Liability is Decrease also asset is decreased on 15th August, 2020.