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The board of directors of Capstone Inc. declared a $0.60 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock. What is the entry for the dividend declaration?




a. The board of directors of Capstone Inc. declared a

b. The board of directors of Capstone Inc. declared a

c. The board of directors of Capstone Inc. declared a

d. The board of directors of Capstone Inc. declared a

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jepessoa

Answer:

  • Dr Dividends 9,000
  • Cr Dividends Payable account 9,000

Explanation:

To calculate the dividends declaration we must first determine the number of outstanding stock = shares issued - shares held as treasury stock = 20,000 shares - 5,000 shares = 15,000 shares

Dividends declaration = 15,000 shares x $0.60 = $9,000

The journal entries should be:

  • Dr Dividends 9,000
  • Cr Dividends Payable account 9,000

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