Glant Corporation had authorized and issued 50,000 shares of $50 par value comm

Question

Glant Corporation had authorized and issued 50,000 shares of $50 par value comm stock. On January 15, 2012, the board of directors declared a $2 per share divider be paid on February 28, 2012, to stockholders of record on February 1,2012.Whi the following entries is correct on the indicated date? A) Feb. 28 Dividends Payable 100,000 Cash 100,000 100,000 B) Jan. 15 Retained Earnings C) Feb. 1 Retained Earnings D) Feb. 1 Dividends Payable Cash Dividends Payable Cash 100,000 100,000 100,000 100,000 100,000

Explanation / Answer

Option A is correct:

Feb 28...........Dividends payable..........................$100,000.

..............................To Cash .........................................$100,000.

the entry on Jan 15 will be:

Jan15.............Retained earnings a/c.................$100,000.

....................................To Dividends payable a/c ..................$100,000.

(so option B is wrong)

There will be no entry on the record date i.e Feb 1........(so options C and D are wrong).

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