On June 1, a board of directors declared a $3 per share cash dividend, payable on June 30 to all common stockholders of record on June 15. The company has 10,000 shares of common stock authorized, 1,000 shares issued, and 200 shares in the treasury. The entry to record the dividend declaration increases

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When a board of directors declares a dividend, the company incurs a liability to its shareholders. The amount of the liability is calculated by multiplying the dividend per share by the number of shares outstanding. In this case, the dividend is $3 per share and there are 800 shares outstanding (1,000 issued minus 200 in the treasury), so the liability is $2,400. Therefore, the entry to record the dividend declaration would increase a liability account by $2,400.

On June 1, a Board of Directors Declared a $3