On January 1, Armada Corporation had 95,000 shares of no-par common stock issued
and outstanding.The stock has a stated value of $5 per share. During the year, the following occurred.
Apr. 1 Issued 15,000 additional shares of common stock for $17 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 Issued 2,000 additional shares of common stock for $19 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 the entries, if any, on each of the three dividend dates.
(b) How are dividends and dividends payable reported in the financial statements prepared at
Apr. 1 Cash 255,000
Common Stock 225,000
(15,000 shares x $17 per share = 255,000)
June 15 Dividends 110,000
Dividends Payable 110,000
((95,000 shares + 15,000 shares) x $1 per share = 110,000)
July 10 Dividends Payable 110,000
Dec. 1 Cash 38,000
Common Stock 38,000
Dec. 15 Dividends 134,400
Dividends Payable 134,400
((110,000 shares + 2,000 shares) x $1 per share = 134,400)
Dividends payable should be shown in the current liabilities portion of the balance sheet. Dividends should be closed to retained earnings account, which results in reduced retained earnings balance.
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