Question

The board of directors of Blue Spruce Corp. declared a cash dividend of $2 per share on 42000 shares of common stock on July 15, 2017. The dividend is to be paid on August 15, 2017, to stockholders of record on July 31, 2017. The correct entry to be recorded on August 15, 2017, will include a _________.

Answer 1

Answer:

Dr Dividends payable ($2*42000) $84000

Cr Cash                                                          $84000

Explanation:

Initially,on July 15 2017, the necessary entries would be to debit retained earnings and credit dividends payable with $84000 to show that the company owes the shareholders dividends.

On the payment date, the entries would to debit dividends payable and to record outflow of cash used in making the dividends payment,hence cash or bank account is credited as a decrease in cash and corresponding entry posted to dividends payable.