Lotoya Davis Corporation has 10.29 million shares of common stock issued and out

Question

Lotoya Davis Corporation has 10.29 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 71 cents per share cash dividend to stockholders of record as of June 14, payable June 30.

(a) Prepare the journal entry for each of the dates above assuming the dividend represents a distribution of earnings. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

6/1

6/14

6/30

(b) How would the entry differ if the dividend were a liquidating dividend? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Date

Account Titles and Explanation

Debit

Credit

6/1

6/14

6/30

Explanation / Answer

It is assumed that the face value per share is $1

a) Journal entries

6/1) Retained earnings account debit ($1*10.29*71%) 7.31 million

       Dividend payable account credit 7.31 million

6/14) No entry

6/30) Dividends payable account debit 7.31 million

         Cash account credit 7.31 million

b) Journal entries:

6/1) Additional paid in capital account debit ($1*10.29*71%) 7.31 million

       Dividend payable account credit 7.31 million

6/14) No entry

6/30) Dividends payable account debit 7.31 million

         Cash account credit 7.31 million

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