Dividends Declared near the End of an Accounting Period Require

question 5

Multiple Choice

Dividends declared near the end of an accounting period require two accounting entries:
1) when the dividend is declared; and
2) when the dividend is paid.
The correct entry to record the declaration of a cash dividend of 10c a share calculated on 200 000 shares is:

• A) DR Dividend payable $20 000; CR Bank $20 000
• B) DR Bank $20 000; CR Share capital $20 000
• C) DR Retained earnings $20 000; CR Dividend payable $20 000
• D) DR Dividend payable $20 000; CR Retained earnings $20 000

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Definitions:

Capitalist Income

Income earned from the ownership of capital or investments, typically in the form of profits, interest, and dividends.

Time-Value

The principle that money available now is worth more than the same amount in the future due to its potential earning capacity.

Irving Fisher

An American economist, statistician, inventor, and Progressive social campaigner known for his contributions to economic theory.

Credit Risk

The risk of loss resulting from a borrower's failure to repay a loan or meet contractual obligations.