Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporations has
ID: 2339678 • Letter: R
Question
Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporations has 25,000 shares of stock outstanding. WRJ paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends is?A) Debit cash, 8,000; credit long-term investment, 8,000 B)Debt Long-term investment; credit cash 8,000 C) Debit cash 8,000; credit dividend revenue 8,000 D) Debit unrealized gain-equity 8,000; credit cash 8,000 E) Debit cash 8,000; credit unrealized gain-equity 8,000 Roe Corporation owns 2,000 shares of WRJ Corporation stock. WRJ Corporations has 25,000 shares of stock outstanding. WRJ paid $4 per share in cash dividends to its stockholders. The entry to record the receipt of these dividends is?
A) Debit cash, 8,000; credit long-term investment, 8,000 B)Debt Long-term investment; credit cash 8,000 C) Debit cash 8,000; credit dividend revenue 8,000 D) Debit unrealized gain-equity 8,000; credit cash 8,000 E) Debit cash 8,000; credit unrealized gain-equity 8,000
A) Debit cash, 8,000; credit long-term investment, 8,000 B)Debt Long-term investment; credit cash 8,000 C) Debit cash 8,000; credit dividend revenue 8,000 D) Debit unrealized gain-equity 8,000; credit cash 8,000 E) Debit cash 8,000; credit unrealized gain-equity 8,000
Explanation / Answer
SOLUTION
Option C is correct
Total dividend paid = No. of shares * dividend per share
= 25,000 shares * $4
= $100,000
Dividend received by Roe corporation = 2,000 shares * $4
= $8,000
The entry to record the receipt of dividends -
Cash would be debited with $8,000 and dividend revenue will be credited with $8,000
Cash is debited becuase it is an asset and is is increasing. Receipt of dividend is revenue in nature, so it is credited.