The Goaling Company declared a $3,500 cash dividend on March 1,2012 payable on April 2,2012.The effect of the March 1st transaction on the Goaling Company would be to

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Quizplus · Accepted Answer

When a company declares a cash dividend, it creates a liability called dividend payable, which will increase the balance in that account. At the same time, the retained earnings account will decrease by the amount of the dividend because the profits are being distributed to the shareholders. Therefore, the correct answer is E, as it states that the balance in the dividend payable account will increase, and the balance in the retained earnings account will decrease, both by $3,500. None of the other answer choices accurately reflect the effects of the dividend declaration.

The Goaling Company Declared a $3,500 Cash Dividend on March