Question

The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $220,000 in the current year. It also declared and paid dividends on common stock in the amount of $1.80 per share. During the current year, Sneer had 1 million common shares authorized; 420,000 shares had been issued; and 208,000 shares were in treasury stock. The opening balance in Retained Earnings was $780,000 and Net Income for the current year was $280,000.
Required:
a. Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock.

Answer 1

Answer:

1) Journal entry

No. Account and explanation                 debit            credit

a Cash dividend                                  220000  

     Preferred Dividend payable                                   220000

(To record dividend declared)  

b Preferred dividend payable                220000  

       Cash                                                                   220000

(To record dividend paid)  

C Cash dividend (420000-208000)*1.8 381600  

       Common Dividend payable                                    381600

(To record dividend declared)  

d Common Dividend payable                  381600  

         Cash                                                                     381600

(To record dividend paid)