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 proper entry to be recorded on June 14, 2010 is,
A) Dividends 142,500
Dividends Payable 142,500
B) Dividends payable 142,500
Cash 142,500
C) Dividends 142,500
Retained Earnings 142,500
D) Dividends payable 142,500
Dividends 142,500

Question

Quizplus · Accepted Answer

On June 14, 2010, the declaration of a dividend creates a liability, so the entry is to debit Dividends and credit Dividends Payable for the total amount of the dividend.

The Board of Directors of Irondale Corporation Declared a Cash