Finance and Accounting 2?
Question:
Apr. 1 Issued 15,000 additional shares of common stock for $17 per share
June 15 Declared a cash dividend of $1 per share to stockholders of record on June 30.
July 10 Paid the $1 cash dividend.
Dec. 1 Issued 2,000 additional shares of common stock for $19 per share.
Dec. 15 Declared a cash dividend on outstanding shares of $1.20 per share to stockholders of record on December 31.
Prepare the entries, if any, on each of the three dividend dates
How are dividends and dividends payable reported in the financial statements prepared at December 31?
Answer:
Divident declared is stated as liability. When you pay the dividend debit the liability acc. and credit cash / bank acc.
When declared,
Retained earnings acc. dr.
dividend payable acc. cr
When paid,
dividend payable acc. dr.
cash / bank acc. cr.
So, you will see declared dividend reducing retained earnings and increasing liability in the balance sheet.
When paid it would reduce cash / bank balance and reduce liability acc. on the other side.
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