Question

On January 1, Guillen Corporation had 95,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $5 per share. During the year, the following occurred.
Apr. 1 Issued 25,000 additional shares of common stock for $17 per share.
June 15 Declared a cash dividend of $1 per share to stockholders of record on June 30.
July 10 Paid the $1 cash dividend.
Dec. 1 Issued 2,000 additional shares of common stock for $19 per share.
15 Declared a cash dividend on outstanding shares of $1.2 per share to stockholders of record on December 31.

(b)

How are dividends and dividends payable reported in the financial statements prepared at December 31?

Answer 1

Answer:

Date            Description                                    DR                   CR

June 15      Dividend expenses                      $120,000

                 Dividend Payable                                               120,000

July 10        Dividend Payable                         120,000

                   Cash                                                                  120,000

Dec 15        Dividend Expenses                     146, 400

                  Dividend payable                                           146,400

Explanation:

when dividend is declared and cash is yet to be paid, dividend expenses account will debited while dividend payable account will be credited.

when cash is paid for the dividend, dividend payable account will be credited while the cash account will be credited.

As at June 30, total number of shares outstanding = 95,000 + 25,000 = 120,000

As at December 31, the total number of outstanding shares =  95,000 + 25,000 + 2,000 = 122,000