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Homework answers / question archive / Fetzer Company declared a $0

Fetzer Company declared a $0

Accounting

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:

    1. Debit Retained Earnings, $104,500; credit Cash, $104,500.
    2. Debit Retained Earnings, $100,100; credit Cash, $100,100.
    3. Debit Dividends Payable, $104,500; credit Cash, $104,500.
    4. Debit Dividends Payable $100,100; credit Cash $100,100.

 

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Answer:

d .

Step-by-Step explanation

Retained earnings ...Dr  $100100  (190000-8000)*0.55

                        To Dividend Payable   $100100

                      (Being dividend declared recorded)

                          Dividend Payable ...Dr  $100100

                              To cash                              $100100

             ( Being dividend payment recorded)

Treasury stock consist of shared issued but not outstanding. Dividend is paid on shares issued and outstanding. Hence, treasury stock are excluded while recording dividend payment.

  

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