Question

On January 1. Amanda Corporation had 100,000 shares of no-par common stock issued. 5,000 shares are held as treasury stock has a stated value of $5 per share. During the year, the following occurred.

apr. 1 issued 12,000 additional shares of common stock for $18 per share.

june 15 declared a cash dividend of $1 per share to stockholders of record on june 30.

july 10 paid the $1 cash dividend.

dec. 1 purchased 2,000 additional shares of common stock for $17 per share.

dec. 15 declared a cash dividend on outstanding shares of $1.20 per share to stockholders of record on December 31.

A) prepare entries, if any, on each of the three dividend dates.

B) How are dividend and dividends payable reported in the financial statements prepared at December 31?

Answer 1

A) Journal Entries

April 1	Cash	216000
	common stock		216000
June 15	Retained Earnings [(100000 - 5000 + 12000) * 1]	107000
	Cash Dividend		107000
July 10	Cash Dividend	107000
	Cash		107000
Dec 1	Treasury stock	34000
	Cash		34000
Dec 15	Retained Earnings [(100000-5000+12000-2000)*$1.20]	126000
	Cash Dividend		126000
Dec 31	Cash Dividend	126000
	Dividend payable		126000

B). Dividend will be reported as deduction from retained earnings in the stockholder's equity section and the dividend payable is a liability therefore it is reported as current liability.