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 5,000 shares held as treasury stock. Assuming the dividends were declared on June 1, what is the entry on June 30 to record the payment of cash dividends?A. Dividends 9,000Dividends Payable 9,000B. Dividends Payable 9,000Cash 9,000C. Dividends 12,000Dividends Payable 12,000D. Dividends Payable 12,000Cash 12,000

Answer 1

B. Dividends Payable 9,000 Cash 9,000

Step-by-step explanation:

The journal entry is shown below:

Dividend payable $9,000

To Cash $9,000

(Being the payment of the dividend is paid)

The computation is shown below:

= (20,000 shares - 5,000 shares) × $0.60

= $9,000

We debited the dividend payable as it decreased the liabilities and credited the cash as it reduced the assets