A company's board of directors votes to declare a cash dividend of $1.00 per share on its 12,000 common shares outstanding.The journal entry to record the declaration of the cash dividend is:

A) Debit Dividend Expense $12,000; credit Cash $12,000.
B) Debit Dividend Expense $12,000; credit Common Dividend Payable $12,000.
C) Debit Common Dividend Payable $12,000; credit Cash $12,000.
D) Debit Retained Earnings $12,000; credit Common Dividend Payable $12,000.
E) Debit Common Dividend Payable $12,000; credit Retained Earnings $12,000.

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Sitti marjia Maluddin · Accepted Answer

Final Answer : D, Explanation :  When a company declares a cash dividend, it decreases Retained Earnings (an equity account) and increases Dividends Payable (a liability account) for the total amount of the dividend. The correct entry is to debit Retained Earnings and credit Common Dividend Payable.

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