Spot Corporation declared a cash dividend on December 30,20A,payable on January 10,20B.A journal entry for the dividend was not made in December 20A.What were the effects on the 20A financial statements?

Question

Quizplus · Accepted Answer

As the journal entry for the dividend was not made in December 20A, the retained earnings were overstated (as the dividend should have been deducted from them), creating an overstatement of shareholder's equity. At the same time, the liability to pay the dividend was not recorded, resulting in an understatement of liabilities. Therefore, the correct answer is choice C: retained earnings were overstated and liabilities were understated.

Spot Corporation Declared a Cash Dividend on December 30,20A,payable on January