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Chapter 13: Q7SE_1 (page 709)

Question: Accounting for cash dividends

Java Company earned net income of \(85,000 during the year ended December 31, 2018. On December 15, Java declared the annual cash dividend on its 4% preferred stock (par value, \)120,000) and a $0.25 per share cash dividend on its common stock (50,000 shares). Java then paid the dividends on January 4, 2019.

Requirements

1. Journalize for Java the entry declaring the cash dividends on December 15, 2018.

Short Answer

Expert verified

Answer

Cash Dividend will be debited with $17,300; Dividend payable- Preferred and Dividend payable- common will be credited with $4,800 and $12,500 respectively.

Step by step solution

01

Basic calculation

DividendPayablePreferred=PrefferedStock脳DividendRate=$120,000脳4%=$4,800DividendPayableCommon=NumberofCommonStock脳DividendRate=$50,000脳$0.25=$12,500

02

Journals of declaring dividend

Date

Transaction

Debit

Credit

2018 December 15

Cash Dividend

$17,300

Dividend payable- Preferred

$4,800

Dividend payable- common

$12,500

To record cash dividend declared

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Most popular questions from this chapter

Question: Accounting for cash dividends

Java Company earned net income of \(85,000 during the year ended December 31, 2018. On December 15, Java declared the annual cash dividend on its 4% preferred stock (par value, \)120,000) and a $0.25 per share cash dividend on its common stock (50,000 shares). Java then paid the dividends on January 4, 2019.

Requirements

2. Journalize for Java the entry paying the cash dividends on January 4, 2019.

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1. What is the main advantage they gain by selecting a corporate form of business now?

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