A.) [On the day the Board declares a dividend, it becomes a legal obligation that must be carried through. However, the dividend is not actually distributed until several weeks later. Some choices are completely erroneous and would never be correct accounting.]

On December 13, the Board of Directors of Millstone Inc. declared a cash dividend of $236,000 for common stockholders. What is the correct journal entry for Millstone to record on December 13, the date of declaration?

1.)

	Debit	Credit
Dec. 13
Account payable	236,000
Common dividend payable		236,000

2.)

	Debit	Credit
Dec. 13
Retained earnings	236,000
Common dividend payable		236,000

3.)

	Debit	Credit
Dec. 13
Common dividend payable	236,000
Retained earnings		236,000

4.)

	Debit	Credit
Dec. 13
Dividend expense	236,000
Common dividend payable		236,000

5.)

	Debit	Credit
Dec. 13
Common dividend payable	236,000
Account payable		236,000

B.) Campers Inc. borrowed $10,000 from a local bank on September 1, 2020 and signed a note, promising to repay the loan on March 1, 2021 at an interest rate of 7%. (It is a 6-month note). When the note was signed on September 1, Campers recorded the appropriate journal entry, as follows:

	DEBIT	CREDIT
Sept. 1, 2020
Cash	10,000
Note payable		10,000

Time passes. Campers must make a year-end adjusting entry on December 31, 2020 to accrue interest expense for the year that just ended (even though interest will not be paid until the following year). It must also record a journal entry when the note is settled on March 1, 2021. Select the correct set of journal entries for December 31, 2020 and March 1, 2021. (Amounts are rounded).

Hint: Recall that the final journal entry will include reversals from earlier journal entries, to bring things up to date.

1.)

	DEBIT	CREDIT
Dec. 31, 2020
Interest expense	233
Interest payable		233
Mar. 1, 2021
Note payable	10,000
Interest payable	233
Interest expense	117
Cash		10,350

2.)

	DEBIT	CREDIT
Dec. 31, 2020
Interest expense	233
Interest payable		233
Mar. 1, 2021
Note payable	10,000
Interest payable	233
Cash		10,233

3.)

	DEBIT	CREDIT
Dec. 31, 2020
Interest payable	233
Interest expense		233
Mar. 1, 2021
Note payable	10,000
Interest payable	233
Interest expense		117
Cash		10,116

4.)

	DEBIT	CREDIT
Dec. 31, 2020
Interest payable	233
Interest expense		233
Mar. 1, 2021
Cash	10,233
Note payable		10,000
Interest payable		233