Knudsen Corporation was organized on January 1 2016 During i

Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $5,000; 2017, $12,000; and 2018, $28,000.

2016

2017

2018

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2016

2017

2018

SHOW LIST OF ACCOUNTS

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Date

Account Titles and Explanation

Debit

Credit

Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $5,000; 2017, $12,000; and 2018, $28,000.

Solution

ans)

a) 2016 2017   2018

  Dividends declared 5000 12000 28000

  Allocation to preferred 5000 6000* 6000

Remainder to Common --- 6000 22000

* 2000 X 50 X 6% = 6000

b) 2016 2017 2018

Dividends declared 5000 12000 28000

Dividends in arrears 2000*

Allocation to preferred 5000 7000** 7000

Remainder to common ---- 3000 21000

CALCULATION FOR PREFERRED STOCK DIVIDEND

2000 X 50 X 7% = 7000

CALCULATION FOR DIVIDENDS IN ARREARS:

P/S Dividend (what they SHOULD receive) $7,000

2016 P/S Dividend paid (what they DID receive) 5,000

$3,000    Dividends in arrears

C) Dec 31 Retained earnings 28000

Dividends payable 28000