Question

Blossom Corporation has 10.60 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 73 cents per share cash dividend to stockholders of record as of June 14, payable June 30.

a) Prepare the journal entries for each of the dates above assuming the dividend represents a distribution of earnings. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

b) How would the entries differ if the dividend were a liquidating dividend? (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

a) The journal entries for each of the dates above assuming the dividend represents a distribution of earnings is as follows:

Date	Account and Explanation	Debit ($)	Credit ($)
June 1	Retained Earnings ($10,600,000 * 73%)	7,738,000
	Dividends Payable		7,738,000
	(Recorded the dividend payable)
June 14	No Entry	-	-
June 30	Dividends Payable	7,738,000
	Cash		7,738,000
	(Recorded the payment of dividends payable)

b) The entries that would differ if the dividend were a liquidating dividend is as follows:

Date	Account and Explanation	Debit ($)	Credit($)
June 1	Paid in capital excess of capital - Common Stock	7,738,000
	Dividend Payable		7,738,000
	(Recorded the dividend payable )
June 14	No Entry	-	-
June 30	Dividend Payable	7,738,000
	Cash		7,738,000
	(Recorded the payment of dividend payable)