On 1 November 2014, Oster Company declared a dividend of $3.00 per share. Oster Company has 20 000 ordinary shares outstanding and no preference shares. Which of the following is the journal entry needed to record the declaration of dividends?
A)Debit Retained earnings $60 000 and credit Dividends payable $60 000.
B)Debit Cash $60 000 and credit Dividends payable $60 000.
C)Debit Retained earnings $60 000 and credit Cash $60 000.
D)Debit Dividends payable $60 000 and credit Retained earnings $60 000.

Question

Quizplus · Accepted Answer

When a dividend is declared, Retained Earnings is debited to reduce equity, and Dividends Payable is credited to recognize the liability.

On 1 November 2014, Oster Company Declared a Dividend of $3.00