The detailed answer is under the explanation tab:
Explanation:
I assume the complete question is as follows:
(1.) Prepare all appropriate journal entries, assuming a cash dividend in the amount of $1.00 per share.
(2.) Prepare all appropriate journal entries, assuming a cash dividend in the amount of $5.00 per share.
I will base my solution on the above two requirements:
Task 1:
Prepare all appropriate journal entries, assuming a cash dividend in the amount of $1.00 per share.
Solution:
Journal entry 1:
Debit: Dec 31st Profit & loss Appropriation/ reserves Account Dr $1 / share
Credit: Proposed Dividend $ 1/ share
Journal entry 2:
Debit: 20th Jan Proposed dividend Account Dr $ 1/ share
Credit: Bank $ 1/ share
Task 2:
Prepare all appropriate journal entries, assuming a cash dividend in the amount of $5.00 per share.
Solution:
Journal entry 1:
Debit: Dec 31st Profit & loss Appropriation/ reserves Account Dr $5 / share
Credit: Proposed Dividend $ 5/ share
Journal entry 2:
Debit: 20th Jan Proposed dividend Account Dr $ 5/ share
Credit: Bank $ 5/ share
Key points:
Dividend is the source of income of shareholders when they invest money in shares for gaining the dividend. On the other hand, when company declares the dividend for shareholder, it will be the deduction of its net profit. For transferring dividend out of net profit, we make the profit and loss appropriation account.Journal entries for the dividends:
Following are the journal entries of dividends
1. When dividend is proposed by company out of net profit.
Debit: Profit and Loss Appropriation Account
Credit: Proposed Dividend Account
2. When Proposed dividend is paid by Company
Debit: Proposed Dividend Account
Credit: Bank Account
3. When Dividend is Declared Out of Retained Earning
Debit: Retained Earning Account
Credit: Dividend Account
4. When Such Dividend is Paid
Debit: Dividend Account
Credit: Bank Account
