Spot Corporation declared a cash dividend on December 30, 20A, payable on January 10, 20B. A journal entry for the dividend was not made in December 20A. What were the effects on the 20A financial statements?

Question

Quizplus · Accepted Answer

Since the declaration of dividend took place before the end of the year and a journal entry was not made in the same period, the retained earnings balance will be overstated in the 20A financial statements. As the dividend is payable on January 10, 20B, a liability should have been recorded in the 20A financial statements, which was not done, leading to an understatement of liabilities. Therefore, the correct option is D.

Spot Corporation Declared a Cash Dividend on December 30, 20A