Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is:

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The company declared a cash dividend on its common shares, which means it will need to create a liability on its books until the dividend is paid out. The debit to Retained Earnings is needed to reduce the amount of retained earnings available to the company after the dividend payment. The credit to Common Dividends Payable is needed to create the liability on the books. The amount of the journal entry is $4,000, which is calculated by multiplying the dividend per share ($0.50) by the number of shares outstanding (8,000).

Hutter Corporation Declared a $0