Question

On February 16, Hawthorne Co. declares a $0.39 dividend to be paid on April 5. Hawthorne...

On February 16, Hawthorne Co. declares a $0.39 dividend to be paid on April 5. Hawthorne has 2,050,000 shares of common stock issued and outstanding. The entry recorded by the company on February 16 includes a debit to:

Multiple Choice

  • Dividends Payable and a credit to Cash for $799,500.

  • Dividends and a credit to Dividends Payable for $799,500.

  • Dividends Payable and a credit to Cash for $758,550.

  • Dividends and a credit to Dividends Payable for $758,550

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Answer #1

Answer) Dividends and a credit to Dividends Payable for $799,500.

Explanation:

Dividends declared = 0.39per share

Number of shares outstanding = 2050000 shares

Dividends payable = 2050000 × 0.39 = 799,500

On February 16, dividend was declared and not paid. So, journal entry will includes a debit to 'Dividends' and credit to 'Dividends payable'.

When it is actually paid in April, Journal entry will include a debit to 'Dividends payable' and credit to 'Cash'.

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