Pear Inc declared and paid a $10,000 dividend at the end of the year.How would the transaction be recorded?
A)An increase in expense of $10,000 and a decrease in cash of $10,000.
B)An increase in expense of $10,000 and a decrease in retained earnings of $10,000.
C)A decrease in retained earnings of $10,000 and a decrease in expenses of $10,000.
D)A decrease in retained earnings of $10,000 and a decrease in cash of $10,000.

Question

Quizplus · Accepted Answer

When a company declares and pays a dividend, it results in a decrease in retained earnings and a decrease in cash. Therefore, option D is the correct choice. Option A is incorrect because paying a dividend is not an expense. Option B is incorrect because a dividend payment does not result in an increase in expense. Option C is incorrect because paying a dividend does not result in a decrease in expenses.

Pear Inc Declared and Paid a $10,000 Dividend at the End