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Practice Problem 2

TMac, Inc. is authorized to issue 200,000 shares of common stock. TMac has issued 125,000 shares, and there are 100,000 shares outstanding. TMac is holding 25,000 shares of treasury stock. One June 1, 2016, TMac declared a $2 per share dividend. Payment will be made on August 20 to shareholders on record at the close of business on July 3.

Journalize the transactions needed to record the declaration and payment of the dividends (explanations are not required).

Solution

General Journal
Date	Accounts and explanation	Debit	Credit
June 1	Dividends	$200,000	-
-	Dividends payable	-	$200,000

Calculation: $100, 000 shares outstanding \times $ 2 per share dividend = $ 200, 000$

There is no entry on the date of record, July 3.

General Journal
Date	Accounts and explanation	Debit	Credit
August 20	Dividends payable	$200,000	-
-	Cash	-	$200,000

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