Question

A company declared a $0.80 per share cash dividend. The company has 100,000 shares authorized, 45,000 shares issued, and 42,000 shares of common stock outstanding. What is the journal entry to record the dividend declaration?

Debit Dividends and credit Dividends Payable for $36,000

Debit Dividends and credit Dividends Payable for $33,600

Debit Dividends Payable and credit Cash for $36,000

Debit Dividends Payable and credit Cash for $80,000

The Retained Earnings balance was $22,900 on January 1. Net income for the year was $18,100. If Retained Earnings had a credit balance of $23,800 after closing entries were made for the year, and if additional stock of $5,200 was issued during the year, what was the amount of dividends declared during the year?

$17,200

$23,700

$23,300

$13,000

A company reported net income of $6 million. During the year the average number of common shares outstanding was 3 million. The price of a share of common stock at the end of the year was $5. There were 400,000 shares of preferred stock outstanding on average and no dividends were declared and the preferred stock is noncumulative.

Use the information above to answer the following question. The EPS is approximately:

$0.40.

$1.76.

$1.86.

$2.00.

Use the information above to answer the following question. The Price/Earnings ratio is approximately:

2.00.

2.50.

2.84.

12.50.

Answer 1

Answer of Part 1: The correct answer is “Debit Dividends and Credit Dividends Payable for $33,600”

                                                                               JOURNAL ENTRY

Transaction	Accounts Titles And Explanation	Debit	Credit
1	Dividends       Dividend Payable	33,600	33,600

Dividend Payable = 42,000 * $0.80 = $33,600

Answer of Part 2:

The correct answer is $17,200

Ending Retained Earnings = Beginning Retained Earning + Net Income –Dividend
$23,800 = $22,900 + $18,100 - Dividend
Dividend = $17,200

Answer of Part 3:

The correct answer is $2

EPS = Net Income / No. of Common Stock
EPS = $6million / 3million
EPS = $2

Answer of Part 4:

The correct answer is $2.50

Price /Earnings Ratio = Price per share / EPS
Price/Earnings Ratio = $5 / $2
Price/Earnings Ratio = $2.5