The 2012 annual report for Sneer Corporation disclosed that the company declared

Question

The 2012 annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $230,000 in 2012. It also declared and paid dividends on common stock in the amount of $1.70 per share. During 2012, Sneer had 1 million common shares authorized; 430,000 shares had been issued; and 217,000 shares were in treasury stock. The balance in Retained Earnings was $770,000 on December 31, 2011, and 2012 Net Income was $270,000.

Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock

Using the information given above, prepare a statement of retained earnings for the year ended December 31, 2012.

The 2012 annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $230,000 in 2012. It also declared and paid dividends on common stock in the amount of $1.70 per share. During 2012, Sneer had 1 million common shares authorized; 430,000 shares had been issued; and 217,000 shares were in treasury stock. The balance in Retained Earnings was $770,000 on December 31, 2011, and 2012 Net Income was $270,000.

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

A)

Dividends Declared Dr. 230000

Dividends Payable Cr. 230000

Dividends Payable Dr. 230000

Cash Cr. 230000

B)

Dividends Declared ((430000 - 217000)*1.7) Dr. 362100

Dividends Payable Cr. 362100

Dividends Payable Dr. 362100

Cash Cr. 362100

Part 2:

Statement of Retained Earnings

Thanks.

Retained Earnings, Jan 1 2012 770000 Net Income 270000 Less Dividends Declared on Preferred Stock -230000 Less Dividends Declared on Common Stock -362100 Retained Earnings, Dec 31 2012 447900

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