Question

On January 1, Flounder Corp. had 61,500 shares of no-par common stock issued and outstanding. The stock has a stated value of $4 per share. During the year, the following transactions occurred.

Apr. 1		Issued 11,700 additional shares of common stock for $12 per share.
June 15		Declared a cash dividend of $1.90 per share to stockholders of record on June 30.
July 10		Paid the $1.90 cash dividend.
Dec. 1		Issued 5,200 additional shares of common stock for $13 per share.
Dec. 15		Declared a cash dividend on outstanding shares of $2.30 per share to stockholders of record on December 31. (b) How are dividends and dividends payable reported in the financial statements prepared at December 31?

Answer 1

Journal entry

Date	account and explanation	debit	credit
Apr 1	Cash (11700*12)	140400
	Common Stock		46800
	Paid in capital in excess of stated value-Common Stock		93600
June 15	Cash dividend (73200*1.9)	139080
	Dividend payable		139080
July 10	Dividend payable	139080
	Cash		139080
Dec 1	Cash (5200*13)	67600
	Common stock		20800
	Paid in capital in excess of stated value-Common Stock		46800
Dec 15	Cash dividend (78400*2.3)	180320
	Dividend payable		180320
Dec 31	No entry

b) At the end dividend will be closed in retained earnings and retained earning decrease by total dividend amount but dividend payable is recorded at current liabilities in balance sheet