LMN Ltd declared an interim dividend on 12 February 2018 of 5 cents per share (500 000 issued shares) and paid it on 3 March 2018. The journal entry on 3 March 2018 would include:

Question

Quizplus · Accepted Answer

The journal entry on 3 March 2018 would include a credit to Cash for the amount of the dividend paid out ($25,000), as this is the account being debited in order to make the payment. There is no interim dividend payable account needed, as the dividend has already been declared and paid out, and there is no need to credit Retained Earnings unless there is a reduction in those earnings due to the dividend payment (which is not mentioned in this scenario).

LMN Ltd Declared an Interim Dividend on 12 February 2018