Question

Arco Corporation declared a cash dividend on June 2 of $6 per common share. The company has 2,000 shares of common stock authorized, 1,000 shares issued, and 200 in the treasury. The entry to record the declaration of the cash dividend increases a(n)

Answer 1

The journal entry to record the dividend declaration is:

June 2, 202x, cash dividends are declared

Dr Retained earnings 4,800

Cr Dividends payable 4,800

The journal entry to record the payment of the dividend would be:

Dr Dividends payable 4,800

Cr Cash 4,800

When we calculate dividends, only outstanding stocks are included in the distribution: total outstanding stocks = issued stocks - treasury stocks = 1,000 - 200 = 800