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Chapter 13: Q7SE_2 (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

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

Short Answer

Expert verified

Answer

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

Step by step solution

01

Basic Introduction

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

02

Journals of paying dividend

Date

Transaction

Debit

Credit

2019 Jan 4

Dividend payable- Preferred

$4,800

Dividend payable- Common

$12,500

Cash

$17,300

To record payment of dividend

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Most popular questions from this chapter

Question: Accounting for the purchase and sale of treasury stock

Discount Furniture, Inc. completed the following treasury stock transactions in 2018:

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