On December , Charles Company’s board of directors declared a cash dividend of $1.00 per share on the 50,000 shares of common stock outstanding. The company also has 5,000 shares of treasury stock. Shareholders of record on December 15 are eligible for the dividend, which is to be paid on January 1. On December 1, the company should

Answer (B) is correct. Dividends are recorded on their declaration date by a debit to retained earnings and a credit to dividends payable. The dividend is the amount payable to all shares outstanding. Treasury stock is not eligible for dividends because it is not outstanding. Thus, the December 1 entry is to debit retained earnings and credit dividends payable for $50,000 (50,000 × $1).