Question

Weaver Corporation had the following stock issued and outstanding at January 1, Year 1:

Answer 1

Answer:

1. Total dividend = $229,600

2. See explanation section

Explanation:

1.

Common stockholders' dividend = No. of common shares x dividend per share

Common stockholders' dividend = 52,000 shares x $4

Common stockholders' dividend = $208,000

Preferred dividend = (No. of preference shares x par stock price) x cost of dividend

Preferred dividend = (4,500 x $80) x 6%

Preferred dividend = $360,000 x 6%

Preferred dividend = $21,600

Total dividend = $208,000 + 21,600 = $229,600

2.

When the company declares the dividend, the journal entry to record -

Debit  Retained earnings        $229,600

Credit Dividends payable       $229,600

As the company declares, dividend becomes liable for that company. so, it is a credit. As dividend will be deducted from retained earnings, it becomes a debit.

When the company pays the dividend, the journal entry to record -

Debit  Dividend payable      $229,000

Credit Cash                           $229,000

As the company paid the dividend, cash becomes a credit and payable becomes "0".