Question

hazelnut company earned net income of $92,000 during the year ended december 31, 2025. on december 15, hazelnut company declared the annual cash dividend on its 3% preferred stock (par - value $135,000) and a $0.70 per share cash dividend on its common stock (48,000 shares). hazelnut company then paid the dividends on january 4, 2026
requirements
1 journalize for hazelnut company the entry declaring the cash dividends on december 15, 2025
2 journalize for hazelnut company the entry paying the cash dividends on january 4, 2026
requirement 1. journalize for hazelnut company the entry declaring the cash dividends on december 15, 2025 (record debits first, then credits. select the explanation on the last line of the journal entry table )

Explanation:

Step1: Calculate preferred stock dividend

Preferred stock dividend = Par value of preferred stock × Dividend rate.
Preferred stock dividend = \(135000\times3\%=\$4050\)

Step2: Calculate common stock dividend

Common stock dividend = Number of common shares × Dividend per share.
Common stock dividend = \(48000\times1.70=\$81600\)

Step3: Calculate total dividend

Total dividend = Preferred stock dividend + Common stock dividend.
Total dividend = \(4050 + 81600=\$85650\)

Step4: Journal entry for declaring dividend

When declaring dividend, Retained Earnings is debited (as it reduces the retained earnings) and Dividends Payable is credited (as a liability is created).
Debit: Retained Earnings \(85650\)
Credit: Dividends Payable - Preferred \(4050\)
Credit: Dividends Payable - Common \(81600\)

Step5: Journal entry for paying dividend

When paying dividend, Dividends Payable (liability) is debited (as the liability is settled) and Cash (asset) is credited (as cash is outflow).
Debit: Dividends Payable - Preferred \(4050\)
Debit: Dividends Payable - Common \(81600\)
Credit: Cash \(85650\)

Answer:

Requirement 1:

Date	Accounts and Explanation	Debit	Credit
	Dividends Payable - Preferred		\(4050\)
	Dividends Payable - Common		\(81600\)
	(To record declaration of cash dividends)

Requirement 2:

Date	Accounts and Explanation	Debit	Credit
	Dividends Payable - Common	\(81600\)
	Cash		\(85650\)
	(To record payment of cash dividends)