On December 31, Scott Corporation paid shareholders a $13,000 cash dividend. The entry by Scott Corporation to record the transaction would include

Question

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When a company pays out a cash dividend, it reduces its retained earnings account (which is part of equity) and increases its dividend account. Therefore, the entry would include a debit to the Dividends account and a credit to Cash. Option A is incorrect because there is no credit to Cash. Option B is incorrect because there is no debit to Dividends. Option D is incorrect because there is no direct impact on the Capital Stock account from a cash dividend payment.

On December 31, Scott Corporation Paid Shareholders a $13,000 Cash