Question

The board of directors of Capstone Inc. declared a $0.80 per share cash dividend on its $2 par common stock. On the date of declaration, there were 53,000 shares authorized, 21,000 shares issued, and 4,000 shares held as treasury stock.What is the entry when the dividends are declared?Dividends: 8,800Cash: 8,800Dividends: 36,000Dividends Payable: 36,000Dividends: 8,800Dividends Payable: 8,800Dividends: 12,800Cash: 12,800

Answer 1

When a company declares dividends, it needs to make an entry in its books. The entry when dividends are declared includes a debit to the Dividends account and a credit to the Dividends Payable account. In this case, the correct entry would be Dividends: $14,800 and Dividends Payable: $14,800.

Step-by-step explanation:

When a company declares dividends, it needs to make an entry in its books to reflect this action. The entry when dividends are declared includes a debit to the Dividends account and a credit to the Dividends Payable account. In this case, the board of directors of Capstone Inc. declared a $0.80 per share cash dividend on its $2 par common stock. Since there were 21,000 shares issued and 4,000 shares held as treasury stock, the dividends payable would be calculated as follows: $0.80 x (21,000 - 4,000) = $14,800. Thus, the correct entry when the dividends are declared would be:

Dividends: $14,800
Dividends Payable: $14,800

Answer 2

Dividends: 13,600 Dividends Payable: 13,600

Step-by-step explanation:

Dividends: 8,800Cash: 8,800

Dividends: 36,000Dividends Payable: 36,000

Dividends: 8,800Dividends Payable: 8,800

Dividends: 12,800Cash: 12,800

Share issued =21000

Shares in treasury stock = 4000

Outstanding shares = 21000-4000 = 17000

Dividend per share = $0.80

Total Dividend = 17000 x $0.8

Total Dividend = $13,600

Transaction will be as follows

Dr. Cr.

Dividend $13,600

Dividend Payable $13,600

Data is Inconsistent with the options. According to given information the Journal Entry will be as above.