If Tyrol Willow,the sole stockholder of Willow Hardware,withdraws cash of the business to purchase a family car,the business should record this use of cash with an entry to:

A) Debit Accounts Payable and credit Cash.
B) Debit Cash and credit Salary Expense.
C) Debit Cash and credit Dividends.
D) Debit Dividends and credit Cash.
E) Debit Cash and credit Cash.

Question

Jamal Awadalla · Accepted Answer

Final Answer : D, Explanation :  When a sole stockholder withdraws cash from the business for personal use, it is recorded as a dividend. Therefore, the correct entry is to debit Dividends (increasing the dividends expense, which represents a distribution of earnings to the shareholder) and credit Cash (decreasing the asset).

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