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 48,000 shares authorized, 16,000 shares issued, and 5,000 shares held as treasury stock. What is the entry when the dividends are declared

Answer 1

Answer and Explanation:

The journal entry when the dividend is declared is shown below:

Cash Dividend A/c Dr $8,800 {(16,000 shares - 5,000 shares) × $0.80}

               To Dividend payable A/c $8,800

(Being the dividend is declared)

for recording this we debited the cash dividend as it increased the balance of dividend and credited the dividend payable as it also increased the liabilities