Question

"The board of directors of Capstone Inc. declared a $0.70 per share cash dividend on its $3 par common stock. On the date of declaration, there were 50,000 shares authorized, 23,000 shares issued, and 5,000 shares held as treasury stock. What is the entry when the dividends are declared? A. Dividends 12,600 Dividends Payable 12,600 B. Dividends 12,600 Cash 12,600 C. Dividends 35,000 Dividends Payable 35,000 D. Dividends 16,100 Cash 16,100"

Answer 1

Answer:

• Dr Dividends Declared 12,300
• Cr Dividends Payable 12,300

Explanation:

First we must determine how many shares are outstanding:

23,000 shares issued - 5,000 shares held= 18,000 shares outstanding

Then we multiply shares outstanding times dividends per share:

18,000 shares outstanding x $0.70 per share = $12,300

• Dr Dividends Declared 12,300
• Cr Dividends Payable 12,300