On December 15, 2016, the board of directors of Cross Corporation declared a cash dividend, payable on January 8, 2017, of $.80 per share on the 2,000,000 common shares outstanding. On December 15, 2016, Cross Corporation should:
A)not prepare a journal entry because the event had no effect on the corporation's financial position until 2017.
B)decrease retained earnings $1.6 million and increase expenses $1.6 million.
C)decrease retained earnings $1.6 million and increase liabilities by $1.6 million.
D)decrease cash $1.6 million and decrease retained earnings $1.6 million.

Question

Quizplus · Accepted Answer

When a dividend is declared, retained earnings are decreased and a liability (dividends payable) is created for the amount of the dividend.

On December 15, 2016, the Board of Directors of Cross