A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding.The journal entry to record the declaration of the cash dividend is:
A)Debit Dividend Expense $12,000;credit Cash $12,000.
B)Debit Dividend Expense $12,000;credit Common Dividend Payable $12,000.
C)Debit Common Dividend Payable $12,000;credit Cash $12,000.
D)Debit Retained Earnings $12,000;credit Common Dividend Payable $12,000.
E)Debit Common Dividend Payable $12,000;credit Retained Earnings $12,000.

Question

Quizplus · Accepted Answer

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

A Company's Board of Directors Votes to Declare a Cash