Accounting Midterm Exam ACG-2011: Question 51

A company declared a $0.50 per share cash dividend. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is:

	Debit Common Dividends Payable $4,500; credit Cash $4,500.
	Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.
	Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500.
	Debit Common Dividends Payable $4,000; credit Cash $4,000.
	Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.

$0.50 x 8,000 shares = $4,000