I. Cash Dividends Hart Corporation has the following equity balances: PS, 6% (is
ID: 2461939 • Letter: I
Question
I. Cash Dividends
Hart Corporation has the following equity balances:
PS, 6% (issued at par) 1 Mill
CS ($1 par) 400,000
APIC – CS 800,000
The following total dividends were declared during the year: 2012: $100,000; 2013: 20,000; 2014: 150,000
Calculate the dividends paid to preferred and common shareholders under each assumption.
Assume that the preferred stock is non-cumulative
Year
PS Div
CS Div
2012: 100,000
2013: 20,000
2014: 150,000
Assume that the preferred stock is cumulative
Year
PS Div
CS Div
2012: 100,000
2013: 20,000
2014: 150,000
Assume that the preferred stock is cumulative and participating.
Year
PS Div
CS Div
2012: 100,000
2013: 20,000
2014: 150,000
II. Stock Dividends
Neue Corporation has 100,000 shares of $5 par Common Stock outstanding. Show the journal entries to record the stock dividends.
On 12/1, when the fair of the stock is $80, the company declares a 10% stock dividend.
On 12/1, when the fair of the stock is $80, the company declares a 30% stock dividend.
Year
PS Div
CS Div
2012: 100,000
2013: 20,000
2014: 150,000
Explanation / Answer
Non cumulative Preferred stock means that no arrears of dividend will be paid
2)cumulative dividends receives arreas as well
Cumulatvie and participating means will recive equal share of dividends with common stockholder's
Ratio( 1,000,000: 400,000) = 5:2
(2) Journal entries
Stock dividend = 100,000 *10% = 10,000 shares
Stock dividend 100,000@30% = 30,000 shares
Year Preferred dividend Common stock - dividend 2012:100,000 60,000 40,000 2013: 20,000 20,000 - 2014:150,000 60,000 90,000