Question

The board of directors of Capstone Inc. declared a $0.80 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 18,000 shares issued, and 6,000 shares held as treasury stock. What is the entry when the dividends are declared

Answer 1

Answer: Please see below for answer

Explanation: To calculate dividends, we use the formulae

Dividend =(Number of shares issued -treasury stock held) x Dividend per share =

where number of shares issued = $18,000

treasury stock held = 6000 shares

Imputing the values in formulae becomes

($18,000 - $6000) x 0.80 = 12,000 x 0.80 = $9,600

Journal entry to record declaration of dividends of Capstone Inc.

   Account                                              Debit             Credit

Dividend                                               $9,600

Dividend payable                                                       $9,600