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22 June, 12:42

Basse Corporation has 7,000 shares of common stock outstanding. It declares a $1 per share cash dividend on November 1 to stockholders of record on December 1. The dividend is paid on December 31. Prepare the entries on the appropriate dates to record the declaration and payment of the cash dividend

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  1. 22 June, 12:58
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    November 1, declaration of cash dividends

    Dr Retained Earnings account 7,000 Cr Dividends Payable account 7,000

    December 31, distribution of cash dividends

    Dr Dividends Payable account 7,000 Cr Cash account 7,000

    Explanation:

    The cash dividends will decrease the retained earnings account, since retained earnings is an equity account, when it decreases it has to be debited.

    Dividends payable account is a liability account created when the company declared the dividends and it is cancelled when the company pays the dividends.
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