Following is the shareholders' equity section of the balance sheet of the Optimum Corporation:

$\begin{array} { l }
\text { Share capital: }\ \text { Common shares, } 100,000 \text { shares authorized, }\
65,000 \text { shares issued } & \underline{\$ 650,000} \
\text { Total share capital } & \$ 650,000 \
\text { Retained earnings } & \underline{349,000} \
\text { Total shareholders' equity } & \underline{\$ 999,000} \
\end{array}$

The common shares are currently selling for $15.50 per share.

The entry to record the declaration of a $0.75 per share cash dividend includes:

A) debit to Dividends Payable for $48,750
B) credit to Common shares for $48,750
C) debit to Retained Earnings for $75,000
D) debit to Retained Earnings for $48,750

Question

Following is the shareholders' equity section of the balance sheet of the Optimum Corporation:

$\begin{array} { l  }
\text { Share capital: }\ \text { Common shares, } 100,000 \text { shares authorized, }\
65,000 \text { shares issued } & \underline{\$ 650,000} \
\text { Total share capital } & \$ 650,000 \
\text { Retained earnings } & \underline{349,000} \
\text { Total shareholders' equity } & \underline{\$ 999,000} \
\end{array}$

The common shares are currently selling for $15.50 per share.

The entry to record the declaration of a $0.75 per share cash dividend includes:

A) debit to Dividends Payable for $48,750
B) credit to Common shares for $48,750
C) debit to Retained Earnings for $75,000
D) debit to Retained Earnings for $48,750

Quizplus · Accepted Answer

The correct entry for declaring a cash dividend involves debiting Retained Earnings for the total amount of the dividend. The total dividend is calculated as $0.75 per share times 65,000 shares issued, which equals $48,750.

Following Is the Shareholders' Equity Section of the Balance Sheet