On January 1, 2016, Alpha Corporation had 100,000 shares of common stock outstanding. On April 15, the board declared a $0.30 per share dividend to be paid to stockholders of record on May 4. The dividend was distributed on May 15. Use this information to prepare the General Journal entries (without explanation) for April 15 & May 15. If no entry is required then write "No Entry Required."

Question

Aisha Key

Business

7 April, 04:08

On January 1, 2016, Alpha Corporation had 100,000 shares of common stock outstanding. On April 15, the board declared a $0.30 per share dividend to be paid to stockholders of record on May 4. The dividend was distributed on May 15. Use this information to prepare the General Journal entries (without explanation) for April 15 & May 15. If no entry is required then write "No Entry Required."

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Orlando Hoffman · Answer 1

On 15 April, the journal entries required are:

Dr Retained earnings $30,000

Cr Dividends payable $30,000

On May 15, the following journal entries are required:

Dr Dividends payable $30,000

Cr Cash $30,000

Explanation:

The amount of dividends would be $30,000 ($0.30*100,000), which represents a short term obligation for the company payable to shareholders. To record the obligation, dividends payable account is credited while the corresponding debit goes to retained earnings as dividends are a way to distribute a portion of retained earnings to shareholders.

On the payment date, 15 May, the cash outflow needs to recorded by crediting cash with $30,000 and debiting dividends payable in order to show that the dividends obligation to shareholders has been discharged.