Question

Mary Martin, the sole stockholder of Martin Consulting, received a $2,000 dividend from the company. Identify the general journal entry below that Martin Consulting will make to record the transaction.

A) Dividends 2,000
Cash 2,000
B) Common Stock 2,000
Cash 2,000
C) Dividends 2,000
Common Stock 2,000
D) Cash 2,000
Common Stock 2,000
E) Cash 2,000
Dividends 2,000

Answer 1

Option A is correct

Step-by-step explanation:

When dividends are declared, the appropriate entries would be debit retained earnings and credit dividends payable since the dividends are yet to be paid.

When outright cash is given dividends, it is safe to debit dividends while crediting cash since there an outflow of cash from the business.

As a result, the correct option is A