Question

Mapleleaf Industries declared a $0.75 per share cash dividend. The company has 120,000 shares authorized, 49,000 shares issued, and 46,000 shares of common stock outstanding. What is the journal entry to record the dividend declaration? Multiple Choice Ο O Debit Dividends Payable and credit Cash for $36,750 Ο Debit Dividends and credit Dividends Payable for $36.750, Ο Debit Dividends and credit Dividends Payable for $34.500 Ο O Debit Dividends Payable and credit Cash for $90.000

Answer 1

Solution:
1st
	Answer is 3rd option Debit Dividends and credit Dividends Payable for $34,500
Working Notes:
	Dividend is paid to the shares currently outstanding in our case share outstanding is 46000 shares , So dividend payable ( shares outstanding x dividend per share = 46000 shares x $0.75 per share = $34,500)
	Dividend is paid on shares outstanding not on shares issued or share authorized so other option are not correct answer ,correct answer is 3rd due to above reason.
2nd.
	Answer is 4th option "The amount of the potential dividend is $8 per year per preferred share"
Working Notes:
	8% preferred stock with a $100 par value
	Preferred stock holder will get 8% of $100 = $8 per share if dividend is declared and is fixed it should be paid $8
	Is potential $8 per year as dividend is paid to preferred only when dividend is declared by the company to common stock holders , first will be paid to preferred stock holders.
	8% preferred stock means 8% dividend is paid of preferred capital. Not it is 8% of total contributed capital can be preferred stock is wrong.
	Preferred stock holder are not guaranteed a dividend the have only preferred treatment over common stock holders dividend will be paid first and capital will also be paid back first before common stockholders.
	preferred stock holders are not entitled to 8% of net income , they entitled to 8% of paid value of preferred stock.
Please feel free to ask if anything about above solution in comment section of the question.