Question

Woolford Inc. declared a cash dividend of $1.00 per share on its 2 million outstanding shares. The dividend was declared on August 1, payable on September 9 to all stockholders of record on August 15. Prepare all journal entries necessary on those three dates.

Short answer

The dividend paid by Woolford Inc. on September 9 was $2,000,000.

Step-by-step solution

Meaning of Dividend

Dividends are paid to shareholders. A dividend is an amount paid to a shareholder from the profits produced by the firm in which he holds stock. The sum is determined by the number and type of shares he holds.

Preparing journal Entries of Woolford Inc.

Date	Particular	Folio	Debit $	Credit $
August 1	Retained Earnings A/c(2,000,000$1)		2,000,000
	Dividend Payable A/c			2,000,000
	To record the payment of dividend
August 15	No entry
September 9	Dividend Payable A/c		2,000,000
	Cash A/c			2,000,000
	To record the payment of dividend