On November 1, 2024, Nada, Inc. declared a dividend of $ 3.25 per share on common stock. Nada, Inc. has 27000 shares of common stock outstanding and no preferred stock. The date of record is November 15, and the payment date is November 30, 2024. Which of the following is the journal entry needed on November 30, 2024?

Question

On November​ 1, 2024,​ Nada, Inc. declared a dividend of $ 3.25 per share on common stock.​ Nada, Inc. has 27000 shares of common stock outstanding and no preferred stock. The date of record is November​ 15, and the payment date is November​ 30, 2024. Which of the following is the journal entry needed on November​ 30, 2024?
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Part 1
A.
Debit Cash Dividends $ 87 comma 750​, and credit Cash $ 87 comma 750.
B.
Debit Dividends Payablelong dashCommon $ 87 comma 750​, and credit Cash $ 87 comma 750.
C.
Debit Cash Dividends $ 87 comma 750​, and credit Dividends Payablelong dashCommon $ 87 comma 750.
D.
Debit Cash $ 87 comma 750​, and credit Dividends Payablelong dashCommon $ 87 comma 750.

GPT-4o mini · Answer

To determine the correct journal entry for the payment of dividends on November 30, 2024, we need to calculate the total amount of dividends to be paid:

Number of shares: 27,000 shares
Dividend per share: $3.25

Total dividends = 27,000 shares × $3.25 per share = $87,750

On the payment date (November 30, 2024), the company will pay the recorded dividends, which were previously declared and recorded as a liability (Dividends Payable) when the dividend was declared. Therefore, the correct journal entry to record the payment of dividends will be:

Debit Dividends Payable for the total dividends amount (to reduce the liability)
Credit Cash for the same amount (to reflect the outflow of cash)

Thus, the correct option is:

B. Debit Dividends Payable - Common $87,750, and credit Cash $87,750.