The board of directors of Irondale Corporation declared a cash dividend of $2.50 per share on 57,000 shares of common stock on June 14, 2010. The dividend is to be paid on July 15, 2010, to shareholders of record on July 1, 2010. The effects of the entry to record the declaration of the dividend on June 14, 2010 , are to

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When a dividend is declared, it represents a distribution of earnings or profits to shareholders, and therefore reduces the retained earnings account and consequently the stockholders' equity. However, at the date of declaration, the company incurs a liability to pay the dividend, which is recorded as a current liability, thus increasing liabilities. Therefore, the entry to record the declaration of a dividend is to decrease stockholders' equity and increase liabilities.

The Board of Directors of Irondale Corporation Declared a Cash