Question

On January 1, Ayayai Corp. had 61,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following transactions occurred.

Apr. 1 Issued 9,450 additional shares of common stock for $11 per share.
June 15 Declared a cash dividend of $1.50 per share to stockholders of record on June 30.
July 10 Paid the $1.50 cash dividend.
Dec. 1 Issued 4,200 additional shares of common stock for $11 per share.
Dec. 15 Declared a cash dividend on outstanding shares of $1.60 per share to stockholders of record on December 31.

Required:
Prepare the entries, if any, on each of the three dates that involved dividends.

Answer 1

The entries for dividend transactions for Ayayai Corp. on June 15 and December 15 involve debiting Retained Earnings and crediting Dividend Payable with the total dividend amount, while the July 10 entry involves debiting Dividend Payable and crediting Cash for the same total dividend amount.

Step-by-step explanation:

For Ayayai Corp., the journal entries on each of the dates involving dividends would be as follows:

1. June 15: Dividends Declared
   
   • Debit: Retained Earnings for total dividend amount
   • Credit: Dividend Payable for total dividend amount

   Calculation: 61,000 shares + 9,450 shares = 70,450 shares (Total shares before June 30)
   Dividend per share = $1.50
   Total dividend = 70,450 shares × $1.50/share = $105,675

   Journal entry:
   Debit Retained Earnings $105,675
   Credit Dividend Payable $105,675

2. July 10: Dividends Paid
   
   • Debit: Dividend Payable for total dividend amount
   • Credit: Cash for total dividend amount

   Journal entry:
   Debit Dividend Payable $105,675
   Credit Cash $105,675

3. December 15: Dividends Declared
   
   • Debit: Retained Earnings for total dividend amount
   • Credit: Dividend Payable for total dividend amount

   Calculation: 61,000 shares + 9,450 shares + 4,200 shares = 74,650 shares (Total shares before December 31)
   Dividend per share = $1.60
   Total dividend = 74,650 shares × $1.60/share = $119,440

   Journal entry:
   Debit Retained Earnings $119,440
   Credit Dividend Payable $119,440