Answer:
Grand Finale Fireworks
1. Record of the declaration of a cash dividend of $0.20 per share to all shares outstanding on January 29:
Outstanding shares:
Jan 1 outstanding = 16,000
add Jan 2 issue = 2,000
less Treasury stock = 1,100
Outstanding = 16,900
Calculation of cash dividend:
Dividend amount = $0.20 x 16,900 = $3,380
Accounting records for the declaration would be:
January 29:
Debit Dividends with $3,380
Credit Dividends Payable with $3,380
To record the declaration of $0.20 cash dividend to outstanding shares of 16,900 on this date.
Explanation:
When a dividend is declared, the dividend becomes payable on the shares outstanding at the date of record. This is one of the three important dates with respect to dividends. The first is the declaration date, which records the liability of the dividend. The second date is the date of record, which calculates the shares outstanding to which dividends would be paid. And the last is the payment date, when the dividend is settled.
When a dividend is declared, therefore, the records necessary are a debit to Dividend Account and a credit to Dividends Payable account.
