Question

A corporation declares a dividend of​ $0.50 per share on​ 10,000 shares of common stock. Which of the following would be included in the entry to record the​ declaration? A. Paid−In Capital in Excess of Par—Common would be credited for​ $5,000 B. Retained Earnings would be credited for​ $5,000 C. Retained Earnings would be debited for​ $5,000 D. Dividends Payable—Common would be debited for​$5,00

Answer 1

C. Retained Earnings would be debited for​ $5,000

Step-by-step explanation:

When the dividend is declared by a company, it becomes a liability for that company. Since, the amount has to be paid from the retained earnings balance of the company, it becomes a debit account. The journal entry should be as follows:

Retained Earnings Debit

Dividend payable Credit

The amount = 10,000 shares x $0.50 per share

Amount to be paid = $5,000

Therefore, option C is correct.