The board of directors of Splish Brothers Inc. declared a cash dividend of $2 per share...

The board of directors of Splish Brothers Inc. declared a cash dividend of $2 per share on 46000 shares of common stock on July 15, 2017. The dividend is to be paid on August 15, 2017, to stockholders of record on July 31, 2017. The effects of the journal entry to record the declaration of the dividend on July 15, 2017, are to

Expert Solution

Dividend is the sum of money that is paid by the company to shareholders. These sum are paid out of the profits of the company. The shareholders may either get dividend as cash or as stock as the case may be.

In the above question, the board of directors declared cash dividend of $ 2 per share on 46,000 shares of common stock as on July 15, 2017.

Total cash dividend = 46,000*2

Total cash dividend to pay = $ 92,000.

So the journal entry will be a debit to retained earnings for $ 92,000 and credits dividend payable account by $ 92,000 respectively.

Retained earning ac. Dr. $ 92,000

To dividend payable. Cr $ 92,000

Dividend payable account is a liability account and is cancelled by a debit entry when the dividend is actually paid.

SUMMARY :

Here, the dividend is declared as on July 15. So the journal entry will be a debit to retained earnings by $ 92,000 and credit dividend payable account by $ 92,000 respectively to record the dividend declaration.

ekkarill92 answered 2 years ago

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