Question

On January 1 Weiss Corporation had 60,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $5 per share. During the year, the following transactions occurred:
Apr. 1 Issued 10,000 additional shares of common stock for $10 per share.
June 15 Declared a cash dividend of $1.00 per share to stockholders of record on June 30.
July 10 Paid the $1.00 cash dividend.
Dec. 1 Issued 4,000 additional shares of common stock for $12 per share.
Dec 15 Declared a cash dividend on outstanding shares of $1.00 per share to stockholders of record on December 31.

Required:
a. Prepare the entries, if any, on each of the three dates that involved dividends.
b. How are dividends and dividends payable reported in the financial statements prepared at December 31?

Answer 1

Explanation:

a. The journal entries are as follows

On June 15

Retained earning A/c Dr   $60,000

            To Dividend payable   $60,000

(Being cash dividend declared)

On June 30

No journal entry is required

On June 10

Dividend payable $60,000

     To Cash $60,000

(Being the dividend is paid)

On Dec 15

Retained earning A/c Dr   $64,000

            To Dividend payable   $64,000

(Being cash dividend declared)

On Dec 31

No journal entry is required

b. Now the dividend is reported on the retained earning statements in a negative sign whereas the dividend payable is reported on the current liabilities of the balance sheet