When the board of directors declares a $500 dividend, which of the following would be included in recording the transaction?
A)Increase in retained earnings, increase in dividends declared
B)Decrease in cash, decrease in dividends payable
C)Increase in dividends declared, increase in dividends payable
D)Decrease in dividends payable, increase in cash

Question

Quizplus · Accepted Answer

When a board of directors declares a dividend, it is recorded as an increase in dividends declared and an increase in dividends payable since the payment of the dividend has not yet occurred. The payment of the dividend later on would then result in a decrease in dividends payable and a decrease in cash. The declaration of a dividend itself does not impact retained earnings.

When the Board of Directors Declares a $500 Dividend, Which