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The board of directors of Capstone Incorporated declared a $0.60 per share cash dividend on its $1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock.Assuming the dividends were declared on June 1, what is the entry on June 30 to record the payment of cash dividends? Transection Account Title Debit CreditA. Dividends 9,000  A. Dividends Payable   9,000B. Dividends Payable 9,000  B. Cash   9,000C. Dividends 12,000  C. Dividends Payable   12,000D. Dividends Payable 12,000  D. Cash   12,000Multiple ChoiceOption AOption BOption COption D

Question

The board of directors of Capstone Incorporated declared a 0.60persharecashdividendonits0.60 per share cash dividend on its 1 par common stock. On the date of declaration, there were 50,000 shares authorized, 20,000 shares issued, and 5,000 shares held as treasury stock.Assuming the dividends were declared on June 1, what is the entry on June 30 to record the payment of cash dividends? Transection Account Title Debit CreditA. Dividends 9,000  A. Dividends Payable   9,000B. Dividends Payable 9,000  B. Cash   9,000C. Dividends 12,000  C. Dividends Payable   12,000D. Dividends Payable 12,000  D. Cash   12,000Multiple ChoiceOption AOption BOption COption D

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Solution

The correct answer is Option B.

Here's the step-by-step calculation:

  1. First, we need to determine the number of shares that are eligible for dividends. The company has issued 20,000 shares, but 5,000 of these are held as treasury stock and are not eligible for dividends. So, the number of shares that will receive dividends is 20,000 - 5,000 = 15,000 shares.

  2. Next, we multiply the number of shares by the dividend rate to find the total amount of dividends to be paid. So, 15,000 shares * 0.60/share=0.60/share = 9,000.

  3. The entry to record the payment of cash dividends is a debit to Dividends Payable and a credit to Cash. So, the correct entry is:

    Dividends Payable 9,000 Cash 9,000

So, the correct answer is Option B.

This problem has been solved

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