Asked by Mayesha Tanjeen on Jun 26, 2024
Verified
If a corporation declares a 10% stock dividend on its common shares, the account to be debited on the date of declaration is
A) Stock Dividends Distributable.
B) Common Shares.
C) Share Capital.
D) Dividends Declared.
Stock Dividends Distributable
Shares of stock that are to be issued to shareholders as a dividend, representing a distribution of additional shares rather than cash.
Common Shares
Units of ownership interest in a corporation, giving holders voting rights and a share in the company’s profits via dividends.
Dividends Declared
Dividends declared are the portion of a company's earnings that the board of directors decides to distribute to shareholders.
- Establish the correct journal entries essential for dividend declarations and payments.
Verified Answer
AV
Adriana VillagomezJun 30, 2024
Final Answer :
D
Explanation :
When a corporation declares a stock dividend, it is essentially declaring a dividend that will be paid out in the form of additional shares rather than cash. The account that gets debited to reflect this declaration is "Dividends Declared" (or a similar account), as this represents the company's commitment to distribute additional shares to shareholders. This entry recognizes the liability the company has incurred by declaring the dividend.
Learning Objectives
- Establish the correct journal entries essential for dividend declarations and payments.