Fetzer Company declared a $0.40 per share cash dividend. The company has 220,000

Question

Fetzer Company declared a $0.40 per share cash dividend. The company has 220,000 shares authorized, 209,000 shares issued, and 8,800 shares in treasury stock. The journal entry to record the payment of the dividend is:

Debit Retained Earnings $88,000; credit Common Dividends Payable $88,000.

Debit Retained Earnings $83,600; credit Common Dividends Payable $83,600.

Debit Common Dividends Payable $83,600; credit Cash $83,600.

Debit Retained Earnings $80,080; credit Common Dividends Payable $80,080.

Debit Common Dividends Payable $80,080; credit Cash $80,080.

Explanation / Answer

The correct answer is Option E i.e. Debit Common Dividends Payable $80,080; credit Cash $80,080.

Explanation: Amount of dividend = (209,000 - 8,800) x $0.40

.......................................................= $80,080

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