Question

On November 1, the board of directors of Castle Industries declares a cash dividend of $1 per share on its 1 million shares, payable to shareholders of record November 15, to be paid December 1. The ex-dividend date is two days before the date of record. On which of the following dates will journal entries be recorded? (Select all that apply.) Check All That Apply
A.November 1
B.November 13
C.November 15
D. December 1

Answer 1

Answer:

The correct answers are:

A) & D) which is November 1 and December 1 respectively.

Explanation:

When paying dividends, the business and its shareholders must consider very carefully three important dates.

1. The first date is when the firm publicly declared the dividend. This is called the Declaration Date, which triggers the first journal entry to move the dividend money into a dividends payable account.

       The Date of Declaration according to the question is November 1

     2. The second date is referred to as the Date of Record, and shareholder of stock at this date is entitled to receive a dividend. This does NOT need any journal entry.

      3. The third date, the Payment Date. It refers to the date of the dividend will be paid to shareholders and will necessitate the second journal entry. This records the reduction of the dividends payable account, and the matching reduction in the cash account.

Cheers!