Asked by Torrance Thomas on May 23, 2024
Verified
The declaration by a corporation's board of directors of a cash dividend on common stock creates a liability on the declaration date.
Cash Dividend
A payment made by a company out of its earnings to shareholders, usually in the form of cash.
Liability
Financial obligations or debts owed by a company to creditors, typically due in the near or distant future.
Declaration Date
The date on which the board of directors officially approves a dividend.
- Comprehend the consequences that the declaration and payment of cash dividends have on a firm's liabilities and owners' equity.
Verified Answer
SB
SubAqurius BarttMay 29, 2024
Final Answer :
True
Explanation :
When a corporation's board of directors declares a cash dividend on common stock, it creates a legal obligation for the corporation to pay out the dividend to its shareholders. This obligation is recognized as a liability on the corporation's books on the declaration date.
Learning Objectives
- Comprehend the consequences that the declaration and payment of cash dividends have on a firm's liabilities and owners' equity.