Cash Dividends Cope Company declares a $90,000 dividend. Cope\'s common stock ha
ID: 2454674 • Letter: C
Question
Cash Dividends
Cope Company declares a $90,000 dividend. Cope's common stock has a $5 par value and 80,000 shares outstanding. Cope's preferred stock is 5%, $12 par, and there are 20,000 shares outstanding. Cope has not paid dividends in the past three years. Cope's preferred stock is cumulative.
Required:
A. Determine how the $90,000 in dividends should be allocated to preferred and common stockholders.
1. Dividends distributed to preferred stockholders?
2. Dividends distributed to common stockholders?
B. Prepare the journal entry that would be recorded on the date of declaration. For compound journal entries, if an amount box does not require an entry, leave it blank.
Column 1 options are: Additional Paid In Capital, Dividends Payable Common Stock, Dividends Payable Preferred Stock, Retained Earnings, Treasury Stock, Cash, Dividends Receivable Common Stock & Dividends Receivable Preferred Stock
Columns 2 & 3 in the table are Debits (DR) & Credits (CR) respectively...
C. Determine how the $90,000 in dividends should be allocated to preferred and common stockholders, assuming that the preferred stock is noncumulative.
1. Dividends distributed to preferred stockholders?
2. Dividends distributed to common stockholders?
Explanation / Answer
A)Incase of cummulative preference shares ,dividend of past years are paid in current year before payment of dividend to common stockholders.
Preferred dividend = 20000 * 12*.05 =$ 12000
Past dividend = 12000 *3 = 36000
Current dividend = 12000
Total dividend paid to preferred stokholders in current year = 48000
Dividend to common stockholders = 90000 - 48000 = $ 42000
B)
C)In case of non cummulative preferred stock , dividend for past years is not paid in current year.
Preferred dividend = 12000
common dividend = 90000 - 12000 = $ 78,000
Date Title Debit credit a Retained earnings 90000 Dividend payable -common stock 42000 Dividend payable -Preferred stock 48000 [being dividend declared]Related Questions
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