A company declares a cash dividend on its common stock on December 24, Year One, payable to owners of record on January 2, Year Two, with checks to be mailed on January 9, Year Two.
A company declares a cash dividend on its common stock on December 24, Year One, payable to owners of record on
January 2, Year Two, with checks to be mailed on January 9, Year Two. Which of the following statements is true?
a) The owners will record the revenue from this transaction in Year Two but the company will record the effect of the dividend in Year One.
b) This dividend is recorded by the company as an operating expense on its income statement.
c) The company will have a liability on its December 31, Year One balance sheet and the owners will record a receivable on their December 31, Year One balance sheet.
d) Both the revenue and the dividend paid will be recorded by the two companies on January 9, Year Two when payment is made.
I think that the correct answer is d.
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