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    Jazzy2010's Avatar
    Jazzy2010 Posts: 5, Reputation: 1
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    #1

    Mar 23, 2010, 02:37 PM
    Dividends Declared - Please verify my answer or correct me
    Transaction: The board of directors declared a $2.70 per-share cash dividend payable on January 14 to stockholders of record on December 26th.


    I have 10,000 shares authorized of common stock, no par, with a stated value of $30 per share.
    My general ledger Common Stock account has a credit balance of $189,000 (6300 shares x $30). My general ledger Treasury Stock account has a balance of $44,610 (1,000 shares) and I recently repurchased another 700 shares totaling 1,700 shares. Based on this I would assume I have 4,600 shares outstanding.

    I thought I would have to debit Retained Earnings since I am declaring $12,420 (4600 shares x $2.70) and I would need to credit Dividend Payable.

    Should I not debit retained earnings?
    Does my calculation for outstanding shares sound right to you?

    Thanks again for your help.

    I do have a Dividends Declared - Cash Account available in my project.
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
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    #2

    Mar 24, 2010, 06:14 AM

    The entry is correct that debits dividends and credit dividends payable. The dividends account is closed to retained earnings
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