Explanation:
The effects are as follows:
a. In the first option, there is No effect in any item of the financial statements
b. In the second option, there is No effect in any item of the financial statements
c. In the third option, there is No effect in any item of the financial statements
d. No impact on the assets but it increases the liabilities side and decreases the stockholder equity
The journal entry is shown below:
Retained earning A/c Dr XXXXX
To Dividend payable A/c XXXXX
(Being cash dividend declared)
When the dividend is declared, the dividend amount should be subtracted from the retained earning account.
And, since the dividend is declared that increases the balance of dividend
In addition, the dividend payable and the retained earning account have a credit balance. The increase in dividend payable account would have credit balance whereas the decrease in retained earning account has a debit balance.
e. Paying the cash dividend declared in (d)
The journal entry is shown below:
Dividend payable A/c XXXXX
To Cash A/c XXXXX
(Being the cash dividend is paid)
Since it reduces the liabilities and the asset side also but it does not have any impact on the stockholder equity
