usual type of dividend paid to stockholders. It is typically expressed on a dollar-and-cents-per-share basis.However, with preferred stock, the dividend is expressed as a percentage of par value. Dividends are paid on outstanding shares. Assume on 11/15/2000, a cash dividend of $1.50 per common share is declared. Issued shares are 12,000 and treasury shares are 2000. The record date is 12/20/2000. Payment is to be made on 1/15/2001. The entry on 11/15/2000 is to debit retained earnings and credit cash dividends payable for $15,000 (10,000 shares x $1.50). Cash dividends payable is a current liability. No entry is made on the record date. On 1/15/2001, cash dividends payable is debited and cash credited for $15,000. Assume there are 30,000 shares of $10 par value, 8% preferred stock.

The cash dividend is:

30,000 shares
x $10 par value
$300,000 total par value
x .08 dividend rate
$24,000 cash dividend