Question

The board of directors of Chester, Inc. authorizes a $0.10 cash dividend to its 10,000 shares of common stock issued and outstanding. On the date of payment, a journal entry will debit which of the following accounts and for what amount?

A) Common Dividend Expense for $1,000.

B) Cash for $1,000.

C) Common Dividend Payable for $1,000.

Answer 1

C

Step-by-step explanation:

In this question, we are asked to state the appropriate amount that will be debited from which of the accounts in the question.

To answer this appropriately, we need to calculate the dividend payable.

Mathematically that is equal to cash dividend * number of shares

From the question, we can identify the cash dividend as $0.10 and the number of shares as 10,000

The dividend payable is thus 0.1 * 10,000 = $1,000

The journal entry will be:-

Dividend payable $1,000

Cash $1,000

This makes option C the correct answer