Pear Inc declared and paid a $10,000 dividend at the end of the year.How would the transaction be recorded?
A)Dr.Expense $10,000, Cr.Cash $10,000
B)Dr.Expense $10,000, Cr.Retained earnings $10,000
C)Dr.Retained earnings $10,000, Cr.Expenses $10,000
D)Dr.Retained earnings $10,000 Cr.Cash $10,000

Question

Quizplus · Accepted Answer

Dividends are payments made by the company to its shareholders and are recorded as a reduction of retained earnings. Therefore, the transaction should be recorded as a debit to retained earnings and a credit to cash. Option D correctly records the transaction with a debit to retained earnings for $10,000 and a credit to cash for $10,000.

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