Problem 2 (15 Points) a. On November 27, the board of directors of Henderson Com
ID: 2584067 • Letter: P
Question
Problem 2 (15 Points) a. On November 27, the board of directors of Henderson Company declared a $.40 per share dividend. The dividend is payable to shareholders of record on December 7. Cash dividend payment occurs on December 24. Henderson has 65,000 shares of $1 par common stock outstanding at November 27. Journalize the entries needed for the declaration and payment dates On October 10, the board of directors of Pitcher Corporation declared a 10% stock dividend. On October 10, the company had 65,000 shares of $1 par common stock issued and outstanding with a market price of $8 per share. The stock dividend will be distributed on October 31 to shareholders of record on October 25. Journalize the entries needed for the declaration and distribution of the stock dividend b.Explanation / Answer
Answer (a)
Journal entry is not required on the date of record. However, the entries for declaration and payment dates are as follows:
Date
Account name
Description
Debit ($)
Credit ($)
November 27
Dividend or Retained Earning*
Declared $ 0.40 per share cash dividend payable on December 24 to shareholders of record December 7
26,000**
November 27
Dividends payable
Declared $ 0.40 per share cash dividend payable on December 24 to shareholders of record December 7
26,000
December 24
Dividends payable
Paid the dividend declared on November 27
26,000
December 24
Cash
Paid the dividend declared on November 27
26,000
* Some companies debit a Dividends account instead of Retained Earnings when they declare a cash dividend (both methods are acceptable.) The Dividends account is then closed to Retained Earnings at the end of the fiscal year.
**Amount of cash dividend = Dividend declared per share X Number of shares
= $ 0.40 X 65,000
= $ 26,000
Answer (b)
Journal entry is not required on the date of record. However, the entries for declaration and payment dates are as follows:
Date
Account name
Description
Debit ($)
Credit ($)
October 10
Dividend or Retained Earning*
(6500 X $ 8)
Declared 10% stock dividend distributed on October 31 to shareholders of record October 25
52,000
October 10
Common stock dividend distributable
(6500 X $ 1)
Declared 10% stock dividend distributed on October 31 to shareholders of record October 25
6,500
October 10
Paid in capital in excess of Par
Declared 10% stock dividend distributed on October 31 to shareholders of record October 25
45,500
October 31
Common stock dividend distributable
(6500 X $ 1)
Paid the dividend declared on October 10
6,500
October 31
Common stock
Paid the dividend declared on October 10
6,500
* Some companies debit a Dividends account instead of Retained Earnings when they declare a cash dividend (both methods are acceptable.) The Dividends account is then closed to Retained Earnings at the end of the fiscal year.
**Stock dividend
= Common stock outstanding (Number) X Stock dividend rate
= 65,000 shares X 10%
=6,500 Shares
Date
Account name
Description
Debit ($)
Credit ($)
November 27
Dividend or Retained Earning*
Declared $ 0.40 per share cash dividend payable on December 24 to shareholders of record December 7
26,000**
November 27
Dividends payable
Declared $ 0.40 per share cash dividend payable on December 24 to shareholders of record December 7
26,000
December 24
Dividends payable
Paid the dividend declared on November 27
26,000
December 24
Cash
Paid the dividend declared on November 27
26,000