Question

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 3,200 shares held as treasury stock. What is the entry for the dividend declaration?

Answer 1

See below

Step-by-step explanation:

The journal entry is shown below;

Dividend payable $10,080

_________To Cash $10,080

(Being the payment of dividend paid)

The computation is shown below;

= (20,000 shares - 3,200 shares) × $0.6

= $10,080

Dividend payable was debited as it decreases liabilities and credited cash as it reduced the assets.