Question

Aaron Company has 80,000 shares of $10 par common stock outstanding. On May 25, Aaron Company declared a $1.50 cash dividend. The market price of the stock on May 25 was $17 per share. The journal entry to record the cash dividend would include:____________.a. a debit to Cash Dividends for $120,000.b. a debit to Cash for $560,000.c. a credit to Paid-In Capital in Excess of Par—Common Stock for $560,000.d. all of these choices are correct.

Answer 1

Answer is A. a debit to Cash Dividends for $120,000.

Refer below.

Step-by-step explanation:

Aaron Company has 80,000 shares of $10 par common stock outstanding. On May 25, Aaron Company declared a $1.50 cash dividend. The market price of the stock on May 25 was $17 per share. The journal entry to record the cash dividend would include: a debit to Cash Dividends for $120,000.

Answer 2

The entry would be as under:

Dr Cash Dividends $120,000

Cr Dividends Payable $120,000

Step-by-step explanation:

The company announced the dividend of $120,000 ($1.5 * 80,000 shares). This means that the company will have to pay its dividend which it has announced. Hence the liability has arisen which means the entry at the announcement date would be:

Dr Dividend $120,000

Cr Dividend Payable $120,000

When the dividend would be paid the entry would be:

Dr Dividend Payable $120,000

Cr Cash $120,000