Question

Gammon, Inc., declared dividends during the current year as follows. The current year’s cash dividend on the 6 percent, $100 par value preferred stock. 100,000 shares were outstanding at the time of the declaration. A cash dividend of $0.75 per share on the $10 par value common stock. 750,000 shares were outstanding at the time of the declaration. Prepare the general journal entries to record the declaration and payment of these dividends, assuming the declaration is recorded directly to retained earnings. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

1	Journal entry at the time of declaration of cash dividend :
			Dr	Cr
	Retained Earnings		$ 1,162,500
	Dividend Payable			$ 1,162,500
	( Being Dividend Declared )
2	Journal entry at the time of payment of cash dividend :
			Dr	Cr
	Dividend Payable		$ 1,162,500
	Cash			$ 1,162,500
	( Being dividend paid )
*	Dividend declared during the year:
	Cash Dividend on common stock :
	= 750,000 shares * 0.75
	= $ 562,500
	Cash Dividend on common stock :
	= 100,000 shares * $ 100 * 6%
	= $ 600,000
	Total cash dividend declared :
	= $ 562,000 + $ 600,000
	= $ 1,162,500