JournaldrillDeclaring a cash dividend
A journal entry exercise from Journaldrill. Solve it with an account picker and debit and credit fields in your browser, and it is checked the moment you submit.
The task
Westfield Grocers Inc. has 120,000 shares of common stock issued, of which 5,000 are held as treasury stock. The board declares a cash dividend of $0.40 per share, payable next month. Record the declaration.
What this exercise teaches
Outstanding shares are 120,000 - 5,000 = 115,000, so the dividend is 115,000 x $0.40 = $46,000. Cash is not paid until the payment date.
A hint if you get stuck
Declaration reduces retained earnings and creates a liability; treasury shares do not receive dividends.
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