A corporation declares a dividend of $0.50 per share on 10,000 shares of common stock. Which of the following would be included in the entry to record the declaration? A. Paid-In Capital in Excess of Par-Common would be credited for $5,000 B. Retained Earnings would be credited for $5,000 C. Retained Earnings would be debited for $5,000 D. Dividends Payable-Common would be debited for $5,00

Question

Junior Kline

Business

23 December, 23:49

A corporation declares a dividend of $0.50 per share on 10,000 shares of common stock. Which of the following would be included in the entry to record the declaration? A. Paid-In Capital in Excess of Par-Common would be credited for $5,000 B. Retained Earnings would be credited for $5,000 C. Retained Earnings would be debited for $5,000 D. Dividends Payable-Common would be debited for $5,00

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Answers (1)

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Abril Juarez · Answer 1

C. Retained Earnings would be debited for $5,000

Explanation:

When the dividend is declared by a company, it becomes a liability for that company. Since, the amount has to be paid from the retained earnings balance of the company, it becomes a debit account. The journal entry should be as follows:

Retained Earnings Debit

Dividend payable Credit

The amount = 10,000 shares x $0.50 per share

Amount to be paid = $5,000

Therefore, option C is correct.