Use the following data to answer the next three questions: On January 1, 2015, K

Question

Use the following data to answer the next three questions: On January 1, 2015, Kylie's Plumbing, Inc. declared a $2.00 per share dividend payable on February 1, to holders of record on January 15. Before the dividend was declared, the company had 100,000 shares of $10 par value stock outstanding 32) On the date of declaration, the journal entry to record the dividend would include A. B. C. D. E. a credit to Retained Earnings of $ 200,000. a credit to Cash of $ 200,000. a credit to Dividends Payable of $ 200,000. There would be no journal entry on this date. None of the above 33) On the date of record, the journal entry would include a A. credit to Dividends Payable of $200,000. B. credit to Common Stock of $200,000. C. debit to Dividends Payable of $200,000 D. There would be no journal entry on this date. E. None of these is correct. 34) On the date of payment, the journal entry would include a A. credit to Dividends Payable of $200,000. B. credit to Common Stock of $200,000 C. debit to Dividends Payable of $200,000 D. There would be no journal entry on this date. E. None of these is correct.

Explanation / Answer

Om date of declaratio nof the dividend, we just declared the divdend by debiting the retained earning and crediting to Dividend Payable Account. Retained Earnign have the credit balance so when we declare the dividend means we have to reduce the balance in retained earning so we debit the retaiend earning By Crediting the account payable we create a liability for the dividend payable. Answer = 1 Jounral Entry for dividend declaration is done as below Journal Entries Date Account Title and explanation Debit Credit Retained Earning $            2,00,000 1         To Dividend Payable $     2,00,000 Answer = Option A = a crdit to retaiend earning of $ 200,000 Answer = 2 On date of record there is jounal entry is passed in the system so, Answer = Option D = There would be no journal entry on this date. Answer = 3 On the date of payment we debit the Dividend payable and knock off the liability created for dividend payable and credit the cash account because cash goes out Jounral entry is passed as below Journal Entries Date Account Title and explanation Debit Credit Dividend Payable $            2,00,000 1         To Cash $     2,00,000 Answer = Option C = Debit to Dividends Payable of $ 200,000

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