Hunter corporation declared a $0.50 per share cash dividend on its common share.

Question

Hunter corporation declared a $0.50 per share cash dividend on its common share. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is

A. Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.

B. Debit Common Dividends Payable $4,000; credit Cash $4,000.

C. Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500.

D. Debit Common Dividends Payable $4,500; credit Common Dividends Payable $4,500.

E. Debit Retained Earnings $10,000; credit Common Dividends Payables $10,000.

Explanation / Answer

A. Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.

Note:- We Debit "Retained Earning" because dividend is paid out of Retained earning ,which reduces the balance of it from "Credit to Debit". And Dividend payable is credited because it is a libaility for the company to pay dividend.

cash Dividend is on number of outstanding common stock at end = $0.50 * 8000 shares

= $4000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.