Question

The board of directors of Capstone Inc. declared a $0.90 per share cash dividend on its $2 par common stock. On the date of declaration, there were 41,000 shares authorized, 20,000 shares issued, and 7,000 shares held as treasury stock.What is the entry when the dividends are declared?

A. Dividends 11,700 Dividends Payable 11,700
B. Dividends 11,700 Cash 11,700
C. Dividends 36,900 Dividends Payable 36,900
D. Dividends 18,000 Cash 18,000

Answer 1

A. Dividends 11,700 Dividends Payable 11,700

Step-by-step explanation:

The journal entry to record the dividend declared is shown below:

Dividend A/c Dr $11,700

To Dividend payable $11,700

(Being the dividend is declared)

The computation is shown below:

= (Number of shares issued - treasury stock) × cash dividend per share

= (20,000 shares - 7,000 shares) × $0.90

= 13,000 shares × $0.90

= $11,700