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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Entries for cash dividends

The declaration, record, and payment dates in connection with a cash dividend of $135,000 on a corporation's common stock are January 12, March 13, and April 12. Journalize the entries required on each date.

To determine

Cash dividends: The amount of cash provided by a corporation out of its distributable profits to its shareholders as a return for the amount invested by them is referred as cash dividends.

To journalize: The entries related to declaration, record, and payment of cash dividends.

Explanation

Declaration date: The date on which the board of directors of a corporation announces officially to distribute the dividends to its shareholders is referred as declaration date.

January 12–Declaration Date:

Record the journal entry for the declaration of cash dividends.

Date Account Titles and Explanation Post Ref. Debit ($) Credit ($)
January 12 Cash Dividends                             135,000
          Cash Dividends Payable 135,000
(To record declaration of dividends)

Table (1)

Description:

  • Cash Dividends is a temporary stockholders’ equity account. The account is debited as the cash dividends are declared and eventually be transferred to Retained Earnings account. Therefore, debit Cash Dividends account with $135,000.
  • Cash Dividends Payable is a liability account and the amount owed is increased. Therefore, credit Cash Dividends Payable account with $135,000...

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