Barney is a leading global manufacturer and marketer of power tools, hardware, a
ID: 2449134 • Letter: B
Question
Barney is a leading global manufacturer and marketer of power tools, hardware, and home improvement products. A press release contained the following announcement:
NEW BRITAIN, Conn.—(BUSINESS WIRE)—Feb. 18, 2014—Barney (NYSE: BYC) announced today that its Board of Directors approved a regular first-quarter cash dividend of $0.50 per common share. This extends the company’s record for the longest consecutive annual and quarterly dividend payments among industrial companies listed on the New York Stock Exchange. The dividend is payable on Tuesday, March 18, 2014, to shareholders of record as of the close of business on Wednesday, March 5, 2014. At the time of the press release, the company had 319 million shares authorized and 156.9 million outstanding. The par value for the company’s stock is $2.50 per share.
a.) Record the declaration of a cash dividend of $0.50 per share payable on the 156.90 million shares of stock outstanding.
b.) Record the entry on the date of record for a cash dividend of $0.50 cents per share payable on the 156.90 million shares of stock outstanding.
c.) Record the payment of the cash dividend.
d.) Record the entry to close the dividends account.
Explanation / Answer
The Journal Entries to record the Declaration of the Dividend and its payment are:
a) Recording the declaration:
Feb 18, 2014 Dividend Declared A/c Dr $ 78,450,000
To Dividend Payable 78,450,000
(Being the declaration of $ 0.50 per share on 156.9 million outstanding shares)
Note: The Dividend Declared A/c is a temporary contra retained earnings a/c used to show the dividends paid
during the year in the ledger separately. The balance in this account will at the end of the year be closed to the
Retained Earnings A/c. If this account is not maintained the debit will be to the Retained Earnings A/c.
b) On the Date of Record - March 5th, 2014.
No entry need be passed on the record date. It is only to determine who the share holders are (for the 156.9
million shares) for paying the dividend.
c) On payment of the dividend on March 18th, 2014.
Dividend Payable A/c Dr $ 78,450,000
To Cash A/c 78,450,000
d) To close the Dividend declared A/c. (At the end of the year with the balance at that time, which will include
the total dividends paid during the year).
Retained Earnings A/c Dr $ 78,450,000
To Dividend Declared A/c 78,450,000
(Entry to close the Dividend Declared A/c at the end of the year- the amount would not be 78,450,000,
it would be the amount in the account as at the end of the year)
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