Fashonista Skincare has 10,000 shares of 3%, $20 par value preferred stock and 9

Question

Fashonista Skincare has 10,000 shares of 3%, $20 par value preferred stock and 90,000 shares of $2 par common stock outstanding. During a three-year period, Fashionista declared and paid cash dividends as follows: 2010, $3,000; 2011, $13,000; and 2012, $17,000. Requirements 1. Compute the total dividends to preferred and to common for each of the three years if a. preferred is noncumulative. b. preferred is cumulative. 2. For requirement 1.b., journalize the declaration of the 2012 dividends on December 22, 2012, and payment on January 14, 2013. Use separate Dividends payable accounts for preferred and common.

Explanation / Answer

Preferred dividends: 10,000*20*.03 = $6,000 1. a. noncumulative: 2010: Preferred gets 3,000. Common gets 0. 2011: preferred gets 6,000. Common gets 7,000 2012: preferred gets 6,000. Common gets 11,000 b. cumulative 2010: preferred gets 3,000. Common gets 0. 2011: preferred gets 9,000 (6,000 this year plus 3,000 in arrears from 2010). Common gets 4,000. 2012: preferred gets 6,000. Common gets 11,000. 2. December 22, 2012 Debit: Retained earnings 17,000 Credit: Common dividends payable 11,000 Credit: Preferred dividends payable 6,000 January 14, 2013 Debit: Common dividends payable 11,000 Debit: Preferred dividends payable 6,000 Credit: Cash 17,000

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.