Question

On February 28, Memory Inc's board of directors declares a $100,000 dividend, payable to all shareholders as of March 10. The dividend is paid in cash on March 20. What, if any, is Memory's journal entry on February 28

Answer 1

Answer:

The journal entry for February 28 should be:

Dr Retained earnings 100,000

       Cr Dividends payable 100,000

Cash dividends are declared

February 28 is called the dividend declaration date and at that moment, the cash dividend becomes a reality even if it is going to be paid later, and therefore, it must be reported.