Question
Bell Company has an enviable record of not missing a dividend payment to shareholders in the past 42 years. However, it finds itself short of
Bell Company has an enviable record of not missing a dividend payment to shareholders in the past 42 years. However, it finds itself short of cash this year. In order to preserve shareholder goodwill it decides to borrow the money from its bank to pay the usual dividend. It borrows $91,500 for one year at 7.30% and declares a dividend of $0.40 cents a share to its 163,000 shareholders. For interest calculation purposes consider the year has 365 days.
Required 1: The journal entry to record the declaration of dividends has a credit to Dividends Payable. What is the amount reported for dividends payable? Required 2: Annual dividends are declared on November 30th, payable on January 20th. If year end is November 30th, what amount of dividends will be accounted for when determining the ending balance of Retained Earnings for the year? Required 3: If year end is December 31st and the loan was received on December 20th, what is the balance of interest payable reported in the year's financial statements?
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