Please Help! :) Metro Chocolate Corp. produces chocolate bare and snacks under t

Question

Please Help! :)

Metro Chocolate Corp. produces chocolate bare and snacks under the brand names Blast and Soothe, A press release contained the following information; March 5, 2012-Metro Chocolate Corp. today announced that its Board of Directors has declared a special "one-time" cash dividend of $1,20 per share on its 1,12 million outstanding common shares. The dividend will be paid on April 30 to shareholders of record at the close of business on March 26. Required: Prepare any journal entries that Metro Chocolate Corp. should make as a result of information in the press release. Assume that the company has 1.12 million shares outstanding on March 5, the par value is $0,01 per share, and the stock price is $8 per share. (In cases where no entry is required, please select the option "No journal entry required" for your answer to grade correctly. Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in dollars not in millions. Omit the "$" sign in your response.) What two requirements would the board of directors have considered before making the dividend decisions? (Click to select) The board must consider the balances of common stock and cash before declaring a cash dividend. The board must consider the balances of retained earnings and cash before declaring a cash dividend.

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

March 5 2012

Retained Earnings/Cash Dividends (1.12*1.2) Dr. 1344000

Dividends Payable Cr. 1344000

March 26 2012

No Journal Entry Required

April 30 2012

Dividends Payable Dr. 1344000

Cash Cr. 1344000

Part 2:

The board must consider the balances of retained earnings and cash before declaring a dividend.

The board must have sufficient amount of retained earnings to cover the amount od dividend, as well as sufficient cash to pay the dividend.

Thanks.

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