Question

A company declared a $0.80 per share cash dividend. The company has 100,000 shares authorized, 45,000 shares issued, and 42,000 shares of common stock outstanding. What is the journal entry to record the dividend declaration?

1) dr. Dividends Declared..............44,000
cr. Dividends Payable........44,000
2) dr. Dividends Declared.............33,600
cr. Dividends Payable........33,600
3) dr. Dividends Declared..............36,000
cr. Cash.................................36,000
4) dr. Dividends Declared..............80,000
cr. Cash.................................80,000

Answer 1

The correct journal entry to record the dividend declaration is dr. Dividends Declared..............$36,000 cr. Cash...............................$36,000. This entry debits the Dividends Declared account and credits the Cash account.

Step-by-step explanation:

The correct journal entry to record the dividend declaration is:

dr. Dividends Declared..............$36,000

cr. Cash...............................$36,000

When a company declares a cash dividend, it debits the Dividends Declared account and credits the Cash account. In this case, the dividend amount is $0.80 per share, and since there are 42,000 shares of common stock outstanding, the total dividend amount is calculated as follows: $0.80 x 42,000 = $33,600.

However, the correct answer choice is option 3 because the question asks for the journal entry to record the dividend declaration, and $36,000 represents the total dividend amount for all outstanding shares, not just the dividend amount per outstanding share.