Show the allocation of dividends to each class of stock assu

Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 4% and not cumulative.

Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 6% and cumulative.

Journalize the declaration of the cash dividend at December 31, 2016 using the assumption of part (b)

Sleep Corporation was organized on January 1, 2014. During its first year, the corporation issued 40,000 shares of $5 par value preferred stock and 400,000 shares of $1 par value common stock. At December 31, the company declared the following cash dividends: 2014 $6,000 2015 $30,000 2016 $60,000

Solution

Req a: Annual Prefered Dividend: $ 200,000*4% = $ 8000 Allocation of dividend: Year Total Preferred Common Dividend Dividend Dividend 2014 6000 6000 0 2015 30000 8000 22000 2016 60000 8000 52000 Req b: Annual preferred Dividend: 200,000 *6% = 12000 Allocation of dividend: Year Total Preferred Common Arrears of Dividend Dividend Dividend Pref. dividend 2014 6000 12000 0 6000 2015 30000 18000 12000 0 2016 60000 12000 48000 Journal entry for dividend: Dividend Account Dr. 60000     Dividend-Common Payable Account 48000     Dividend-Preferred Payable Account 12000