Question

Fetzer Company declared a $0.45 per share cash dividend. The company has 440,000 shares authorized, 418,000 shares issued, and 17,600 shares in treasury stock. The journal entry to record the payment of the dividend is:

a) Dividends Payable $16,200, Cash $16,200.

b) Dividends Payable $38,000, Cash $38,000.

c) Retained Earnings $38,000, Cash $38,000.

d) Dividends Payable $20,900, Common Stock $17,600, Cash $38,000.

Answer 1

The correct journal entry to record the payment of the dividend is option (b) Dividends Payable $38,000, Cash $38,000.

Step-by-step explanation:

The correct journal entry to record the payment of the dividend is option (b) Dividends Payable $38,000, Cash $38,000.

In this scenario, Fetzer Company has declared a cash dividend of $0.45 per share. To record this dividend payment, we debit the Dividends Payable account for the total amount of the dividend, which is calculated by multiplying the dividend per share by the number of shares issued and outstanding. In this case, the Dividends Payable account would be debited for $38,000. Simultaneously, we credit the Cash account for the same amount, which represents the actual cash payment to shareholders.