Exercise 142 Knudsen Corporation was organized on January 1

Exercise 14-2

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

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Date

Account Titles and Explanation

Debit

Credit

Open Show Work

Solution

Cash dividends Given : 2016, $5,000;

                                        2017, $12,000;

                                         2018, $28,000.

Allocation of Dividends to each class of stock, Assuming the preferred stock dividend is 6% and Non Cumulative

2016       2017     2018

Allocation to Preferred Stock   $5000       $6000    $6000

Allocation to Common Stock     $0            $6000    $22000

Allocation of Dividends to each class of stock, Assuming the preferred stock dividend is 7% and Cumulative

                                                        2016       2017     2018

Allocation to Preferred Stock   $5000       $9000    $7000

Allocation to Common Stock     $0            $3000    $21000

Journal Entry for declaration of dividends for year ended 31 December 2018

   Retained Earnings       Dr $28000

                 Dividend Payable Cr $28000