Fetzer Company declared a $0.55 per share cash dividend.The company has 200,000 shares authorized,190,000 shares issued,and 8,000 shares in treasury stock.The journal entry to record the payment of the dividend is:
A)Debit Retained Earnings $104,500;credit Common Dividends Payable $104,500.
B)Debit Common Dividends Payable $104,500;credit Cash $104,500.
C)Debit Retained Earnings $100,100;credit Common Dividends Payable $100,100.
D)Debit Common Dividends Payable $100,100;credit Cash $100,100.
E)Debit Retained Earnings $110,000;credit Common Dividends Payable $110,000.

Question

Quizplus · Accepted Answer

The journal entry to record the declaration of the dividend would be debit Retained Earnings for $104,500 and credit Common Dividends Payable for the same amount. However, since the dividend is now being paid out, we need to reverse the liability for Common Dividends Payable by debiting it for $104,500 and crediting Cash for the same amount. The number of authorized and issued shares, as well as the treasury stock, are not relevant to this journal entry.

Fetzer Company Declared a $0