Question

2,000,000 shares of no-par common stock were authorized; 750,000 shares were issued on January 1, 2019, at $35 per share. 800,000 shares of $100 par value, 7.5% cumulative, preferred stock were authorized; 540,000 shares were issued on January 1, 2019, at $105 per share. No dividends were declared or paid during 2019 or 2020. However, on December 22, 2021, the board of directors of Permabilt Corp. declared dividends of $15,000,000, payable on February 12, 2022, to holders of record as of January 8, 2022. Prepare the journal entries to record each of the below transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) The issuance of common stock and preferred stock on January 1, 2019. The declaration of dividends on December 22, 2021. The payment of dividends on February 12, 2022.

Answer 1

Answer:

Explanation:

Journal entries

Jan. 1, 2019

Dr Cash (750,000x$35) $26,250,000  

      Cr Common stock  $26,250,000

Jan. 1, 2019

Dr Cash (540,000x$105)         $56,700,000  

      Cr Preferred shares (540,000x$100)  $54,000,000

      Cr Paid in capital in excess of par-Preferred stock      $2,700,000

Dec. 22, 2021

Dr Cash dividend         $15,000,000  

    Cr Dividend payable-Preferred  $12,150,000

    Cr Dividend payable-Common      $2,850,000

Feb. 12, 2022

Dr Dividend payable-Preferred         $12,150,000  

Dr Dividend payable-Common           $2,850,000  

     Cr Cash  $15,000,000

Dividend payable-Preferred = $54,000,000x7.5%x3 years =$12,150,000

Dividend payable-Common = $15,000,000-$12,150,000 =$2,850,000