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3 May, 10:17

Kingbird Corporation has 12.00 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 83 cents per share cash dividend to stockholders of record as of June 14, payable June 30. Prepare the journal entries for each of the dates above assuming the the dividend represents a distribution of earnings.

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  1. 3 May, 12:40
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    On June 1

    Dr Retained earnings $9,960,000.00

    Cr Dividends payable $ 9,960,000.00

    To record declaration of $0.83 dividend per share

    On 30 June

    Dr Dividends payable $ 9,960,000.00

    Cr Cash $ 9,960,000.00

    To record payment of dividends to shareholders

    Explanation:

    The cash dividends as voted by board of directors amount to $ 9,960,000.00 (12 million*$.083)

    However, on June 1 the following entries are required to show an obligation towards the shareholders, in other words, the amount owed to shareholders payable out of retained earnings are reflected thus:

    Dr Retained earnings $9,960,000.00

    Cr Dividends payable $ 9,960,000.00

    To record declaration of $0.83 dividend per share

    On the 14th of June, no entries are required as recording the dividends does not impact books of accounts.

    On 30th June, the following entries are required to payment of cash dividends.

    Dr Dividends payable $ 9,960,000.00

    Cr Cash $ 9,960,000.00
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