Question

Exercise 11-13 On January 1, Monty Corp. had 97,500 shares of no-par common stock issued and outstanding. The stock has a stated value of $6 per share. During the year, the following occurred. Apr. 1 Issued 22,500 additional shares of common stock for $18 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 1,500 additional shares of common stock for $18 per share. 15 Declared a cash dividend on outstanding shares of $4.90 per share to stockholders of record on December 31. (a) Prepare the entries, on each of the three dividend dates.

Answer 1

Answer:

June 15 - Declared a cash dividend of $1 per share

Debit : Dividends  $120,000

Credit : Dividends for Shareholders $120,000

July 10 - Paid the $1 cash dividend

Debit : Dividends for Shareholders $120,000

Credit : Cash  $120,000

Dec 15 - Declared a cash dividend

Debit : Dividends  $595,350

Credit : Dividends for Shareholders $595,350

Explanation:

When a dividend is declared, raise a Liability - Shareholders for Dividends and an Equity item - Dividends.

When the dividend is paid, de-recognize the Liability - Shareholders for Dividends and recognize a Cash Outflow.

Dividends Calculations :

June 15

Dividends = (97,500 + 22,500) x $1.00 = $120,000

Dec 15

Dividends = (97,500 + 22,500 + 1,500) x $4.90 = $595,350