Question

(Ch. 10)
On the declaration date, liabilities are __________

Answer 1

Liabilities are increased on the declaration date of a dividend as the company records the dividend payable, creating a legal obligation.

Step-by-step explanation:

On the declaration date, liabilities are increased for the company issuing a dividend. When a company declares a dividend, it is committing to pay its shareholders a specific amount per share of stock. The declaration creates a legal obligation to pay, and the company records this as a liability in the form of a dividend payable until the actual payment date when the liability is settled and cash is disbursed to shareholders.