On June 1, the board of directors declared a $100,000 cash dividend to be distributed to common stockholders of record on June 15. The dividend will be paid on July 1. The required journal entry on June 1 includes a

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The correct answer is:
a. $100,000 debit to retained earnings.
When a company declares a dividend, it is acknowledging a liability that it has to its shareholders. The declaration of a dividend involves a debit to the retained earnings account and a credit to the dividends payable account. Retained earnings are the accumulated profits of the company that have not been distributed to shareholders and are not earmarked for a specific purpose. When a dividend is declared, it reduces the amount of retained earnings because it represents a portion of those earnings that will be distributed to shareholders.
The journal entry on June 1, the date the dividend is declared, would be:
Debit: Retained Earnings $100,000
Credit: Dividends Payable $100,000
This entry reflects the decrease in retained earnings and the increase in the liability (dividends payable) that the company now owes to its shareholders. The dividends payable account will be cleared when the dividend is actually paid on July 1, with a debit to dividends payable and a credit to cash, reflecting the cash outflow from the company to the shareholders.

On June 1, the Board of Directors Declared a $100,000