Answer:
The journal entries are as follows:
(1)
Retained Earnings A/c Dr. $75,000
Dividends Payable - Preference Shares $10,000
Dividends Payable - Common Stock $65,000
Workings:
Out of $75,000 dividend payable, $10,000 is for the preference dividend being 4% of $250,000 and remaining is for common stock which is $65,000
.
(2) A 15% common stock dividend was declared. The average market value of the common stock is $24
a share.
Retained Earnings..............................Dr... $147,600
Common Stock to be distributed (at par)..........Cr.$61,500
Additional Paid in Capital from stock dividend....Cr.$86,100
Workings:
15% common stock dividend was declared means 15% of 41,000 shares which is 6,150, common stock was declared as dividend at a prevailing market price of $24 out of which $10 is the par value and the remaining $14 is to be covered from additional paid in capital.
(3) (i)
Income Summary A/c Dr. $147,000
To Retained Earnings $147,000
(To record closing entries)
(ii)
Retained Earnings A/c Dr. $73,000
To Retained Earnings appropriated on plant expansion $73,000
(To record appropriated retained earnings)
