Lavender Company has 3,500,000 outstandning ordinary shares with a par value of

Question

Lavender Company has 3,500,000 outstandning ordinary shares with a par value of $1, on December 5, 2017 the company has declared 30% cash dividends of the par payable on February 4, 2018.

Requiment:

1-Prepre the decleration and payment enrties for each of the date above, assuming the dividends represent distrubution of profit.

2-Ignoring above requirement, Prepre the decleration and payment entries for each of the date above, assuming the dividends above has partial return of capital which equal to $250,000.

Explanation / Answer

1-Declaration and payment enrties , assuming the dividends represent distrubution of profit Dec 5,2017 Debit Credit Retained Earnings 1050000 Dividends Payable 1050000 (3500000 shares*$ 1*30%) Feb 4,2018 Dividends Payable 1050000 Cash 1050000 2-Declaration and payment enrties , assuming the dividends are partial return of capital Dec 5,2017 Additional Paid-in-capital 250000 Retained Earnings 800000 Dividends Payable 1050000 (3500000 shares*$ 1*30%) Feb 4,2018 Dividends Payable 1050000 Cash 1050000

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