Q4TI - Horngren'S Financial And Managerial Accounting

Question

On August 1, Hagino Corporation declared a $1.50 per share cash dividend on its common stock (20,000 shares) for stockholders on record as of August 15. Hagino paid the dividend on August 31. Journalize the entries declaring the cash dividend and paying the dividend.

Step-by-Step Solution

Answer

Aug 15- Retained Earnings debited by $30,000, and Common stock dividend payable credited by $30,000.

Aug 31- Common stock dividend payable debited by $30,000, and Cash credited by $30,000.

Step 1: Calculation of common stock dividend payable

$\begin{array}{c}\mathrm{CommonStockDividendPayable}=\mathrm{NumberofShare}\times \mathrm{ValuePerShare}\\ \mathbf{=}\mathbf{20}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{\$}\mathbf{1}\mathbf{.}\mathbf{50}\\ =\$30,000\end{array}$

Step 2: Journals-

Date	Transaction	Debit	Credit
Aug 15	Retained Earnings	$30,000
	Common stock dividend payable		$30,000
	To record dividend declared
Aug 31	Common stock dividend payable	$30,000
	Cash		$30,000
	To record dividend paid