Question

The board of directors of Weston Company declared a cash dividend of $1.50 per share on 42,000 shares of common stock on July 15, 2007. The dividend is to be paid on August 15, 2007, to stockholders of record on July 31, 2007. The correct entry to be recorded on August 15, 2007, will include a Group of answer choices debit to Retained Earnings. credit to Retained Earnings. credit to Dividends Payable. debit to Dividends Payable.

Answer 1

The correct option is debit to Dividends Payable

Step-by-step explanation:

On the declaration date of dividends,the appropriate entries in the books of accounts would be to debit retained earnings since dividends are appropriated from retained earnings and a credit to dividends payable as an outstanding obligation owed to shareholders.

On payment date(August 15,2007),a debit would be passed in the dividends payable account and a credit sent to cash/bank account as an outflow of cash from the business to stockholders.