The board of directors of Capstone Inc. declared a $.80 per share cash dividend

Question

The board of directors of Capstone Inc. declared a $.80 per share cash dividend on its $2 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 4,000 shares held as treasury stock. What is the entry for the dividend declaration?

The board of directors of Capstone Inc. declared a $.80 per share cash dividend on its $2 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 4,000 shares held as treasury stock. What is the entry for the dividend declaration?

Explanation / Answer

DIVIDEND DECLARED PER SHARE = $0.80

TOTAL NUMBER OF ELIGIBLE SHARE (20000 - 4000) = 16000

TOTAL DIVIDEND PAYBLE (16000 * $0.80) = $12800

JOURNAL ENTRY

DIVIDENDS....................................... $12800

   DIVIDENDS PAYBLE $12800

AS THE DIVIDEND IS DECLARED ONLY, IT IS NOT PAID TILL NOW, SO IT WILL BE BOOKED UNDER DIVIDEND PAYBLE.

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