Fetzer Company declared a $0.25 per share cash dividend. The company has 160,000 shares authorized, 152,000 shares issued, and 6,400 shares in treasury stock. The journal entry to record the dividend declaration is:

Debit Common Dividends Payable $38,000; credit Cash $38,000.

Debit Retained Earnings $38,000; credit Common Dividends Payable $38,000.

Debit Retained Earnings $36,400; credit Common Dividends Payable $36,400.

Debit Retained Earnings $40,000; credit Common Dividends Payable $40,000.

Debit Common Dividends Payable $36,400; credit Cash $36,400.