Homework Answers
Answer: decrease shareholders equity and increase liabilities
Explanation :
Journal entry for declaration of Cash Dividend :
| Date | Accounts | Debit $ | Credit $ |
| July 15,2018 | Retained Earnings (0.5 x 84000) | 42,000 | |
| Cash Dividend payable | 42,000 | ||
| (To record declaration of cash dividend) |
From the above journal entry, it shows that declaration of cash dividend decreases(debits) 'Retained Earnings' which come under 'stockholders’ equity' and increases (credits) Cash Dividends Payable which is a liability account.
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