Bowie Company has 100,000 shares of common stock outstanding. On April 15, the board declared a...

Question:

Bowie Company has 100,000 shares of common stock outstanding. On April 15, the board declared a $.30 dividend to be paid to stockholders of record on May 4. The dividend was distributed on May 15. The proper journal entry for Bowie Company on May 15 does includes what?

Cash Dividend

Cash Dividends is a type of dividend given by a corporation to its shareholders to serve as a financial incentive. Moreover, it is important that a corporation's retained earnings can cover any cash dividends declaration because the retained earnings account will be charged for such transaction.

Answer and Explanation:

Date Account Name & Explanation Debit Credit
May 04 Retained Earnings $30,000
Cash Dividends Payable $30,000
To record the declaration of cash dividends
May 15 Cash Dividends Payable 30,000
Cash 30,000
To record the payout of cash dividends

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Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1
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