Question

Fetzer Company declared a $0.50 per share cash dividend. The company has 260,000 shares authorized, 247,000 shares issued, and 10,400 shares in treasury stock. The journal entry to record the dividend declaration is: Multiple Choice Debit Retained Earnings $123,500; credit Common Dividends Payable $123,500. Debit Retained Earnings $118,300; credit Common Dividends Payable $118,300. Debit Common Dividends Payable $123,500; credit Cash $123,500. Debit Retained Earnings $130,000; credit Common Dividends Payable $130,000. Debit Common Dividends Payable $118,300; credit Cash $118,300.

Answer 1

Debit Retained Earnings $118,300; credit Common Dividends Payable $118,300

Step-by-step explanation:

The journal entry to record the dividend declaration is shown below:

Retained earnings Dr ((247,000 - 10,400) × $0.50) $118,300

To Common dividend payable $118,300

(Being the dividend is declared)

Here we debited the retained earnings as it decreased the stockholder equity and credited the common dividend payable as it increased the liabilities

Therefore the second option is correct