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Question 12 BE

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Intermediate Accounting (Kieso)
Found in: Page 811

Short Answer

Graves Mining Company declared, on April 20, a dividend of $500,000 payable on June 1. Of this amount, $125,000 is a return of capital. Prepare the April 20 and June 1 entries for Graves.

The dividend paid by Graves Mining Company is $500,000.

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Step by Step Solution

Meaning of Dividend

Shareholders holding shares in a firm are entitled to receive returns in the form of dividends from the company's profits. Dividends can be paid in cash, stock, assets, etc.

Preparing Journal Entries   

Date

Particular

Debit ($)

Credit ($)

August 1

Retained Earnings A/c.

($5,000,000-$125,000)

375,000

Paid-in Capital in excess of par

Common stock A/c.

125,000

Dividend Payable A/c.

500,000

To record the payment of dividend

June 1

Dividends payable

500,000

Cash A/c.

500,000

To record the payment of dividend

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