Question

Cash Dividends and Income Taxes

1. Prepare journal entries for the transactions.

If an amount box does not require an entry, leave it blank.

During the year ended December 31, 20-2, Bebeto Company completed the following selected transactions:

Apr. 15

Estimated that its 20-2 income tax will be $27,200. Based on this estimate, it will make four quarterly payments of $6,800 each on April 15, June 15, September 15, and December 15. Made the first payment.

25

Declared a semiannual dividend of $0.3 per share on common stock to shareholders of record on May 10, payable May 20. Currently, 71,400 shares of $1 par common stock are outstanding.

May 20

Paid the cash dividends.

June 15

Made estimated tax payment of $6,800.

Sept. 15

Made estimated tax payment of $6,800.

Oct. 25

Declared semiannual dividend of $0.3 per share on common stock to shareholders of record on November 10, payable on November 20.

Nov. 20

Paid the cash dividends.

Dec. 15

Made estimated tax payment of $6,800.

31

Bebeto's actual 20-2 income tax is $31,910. This amount will be paid by March 15, 20-3. Made adjustment for the additional amount owed.

31

Net income for 20-2 was $105,300. Closed the income summary account.

31

Closed the cash dividends account.

1. Prepare journal entries for the transactions.

If an amount box does not require an entry, leave it blank.

Page: 1

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	Apr. 15						1
2							2
3							3
4	Apr. 25						4
5							5
6							6
7	May 20						7
8							8
9							9
10	Jun. 15						10
11							11
12							12
13	Sep. 15						13
14							14
15							15
16	Oct. 25						16
17							17
18							18
19	Nov. 20						19
20							20
21							21
22	Dec. 15						22
23							23
24							24
25	Dec. 31						25
26							26
27							27
28	Dec. 31						28
29							29
30							30
31	Dec. 31						31
32							32
33							33

Answer 1

In the books of Bebeto Company:

Date	Account Titles	Debit	Credit
		$	$
April 15	Income Tax Expense	6,800
	Cash		6,800
April 25	Cash Dividends	21,420
	Dividends Payable		21,420
May 20	Dividends Payable	21,420
	Cash		21,420
June 15	Income Tax Expense	6,800
	Cash		6,800
Sep 15	Income Tax Expense	6,800
	Cash		6,800
Oct 25	Cash Dividends	21,420
	Dividends Payable		21,420
Nov 20	Dividends Payable	21,420
	Cash		21,420
Dec 15	Income Tax Expense	6,800
	Cash		6,800
Dec 31	Income Tax Expense	4,710
	Income Tax Payable		4,710
Dec 31	Income Summary	105,300
	Net Income		105,300
Dec 31	Retained Earnings	42,840
	Cash Dividends		42,840