Dividends The company has the following information about the Common Stock and P
ID: 2570030 • Letter: D
Question
Dividends
The company has the following information about the Common Stock and Preferred Stock
CS Shares authorized
900,000
CS Shares Issued
642,000
CS Treasury Shares
22,000
PS 8%, 90 Par value issued/outstanding shares
80,000
The Board of Directors declared a cash dividend of $.90 per common share on June 24, 2013
The PS shares are cumulative and a dividend was not declared in year 2012
No stocks were issued in Year 2013 or 2012
Required
1
Calculate the total dividend amount --- show your work
2
Prepare the journal entry for the date of declaration
Dividends
The company has the following information about the Common Stock and Preferred Stock
CS Shares authorized
900,000
CS Shares Issued
642,000
CS Treasury Shares
22,000
PS 8%, 90 Par value issued/outstanding shares
80,000
The Board of Directors declared a cash dividend of $.90 per common share on June 24, 2013
The PS shares are cumulative and a dividend was not declared in year 2012
No stocks were issued in Year 2013 or 2012
Required
1
Calculate the total dividend amount --- show your work
2
Prepare the journal entry for the date of declaration
Explanation / Answer
Annual preference dividend = 80000 * 8% * $90 = $576000
Since the PS are cumulative dividend on them shall be paid for 2012 and 2013.
Preference dividend to be paid = $576000 + $576000 = $1152000
Common stock dividend = (642000 - 22000) * $0.90 = $558000
Total dividend to be paid in the current year = Preference dividend + Common stock dividend
= $1152000 + $558000 = $1710000
Note: Dividend on common stock shall not be paid on treasury stock
The journal entries are as below:
1. For declaration of preference dividend:
Retained earnings Dr $1152000
To Preference dividend payable $1152000
2. For declaration of common stock dividend:
Retained Earnings Dr $558000
To Common stock dividend payable $558000