This exercise continues our accounting for Graham’s Yard Care, Inc. from Chapter 9. In this exercise, we will account for the declaration and issuance of a cash dividend by Graham’s Yard Care, Inc. On October 15, 2014, Graham’s Yard Care, Inc. declared a $5,000 dividend. The dividend was payable to all common shareholders of record on October 31 and was paid on November 15, 2014.

Requirements

1. Journalize the entries related to the dividends.

2. What was the effect of the dividend on the following?

■ Cash

■ Retained Earnings

■ Total Shareholders’ Equity