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

Question

The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $160,000 in the current year. It also declared and paid dividends on common stock in the amount of $2.60 per share. During the current year, Sneer had 1 million common shares authorized; 360,000 shares had been issued; and 154,000 shares were in treasury stock. The opening balance in Retained Earnings was $860,000 and Net Income for the current year was $360,000.

Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

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

Prepare a journal entry to close the dividends account. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

1.

Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

2.

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

3.

Prepare a journal entry to close the dividends account. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

1

Declaration Dividends Declared $                         160,000.00          Dividends Payable $ 160,000.00 Payment Dividend Payable $                         160,000.00          Cash $ 160,000.00 Dividends are paid on shares that are issued and outstanding. Dividends are not paid on treasury stock. Shares Issued $                         360,000.00 treasury Stock $                         154,000.00 Shares Outstanding $                         206,000.00 Dividend Per Share $                                      2.60 Total Dividend paid $                         535,600.00 Declaration Dividends Declared $                         535,600.00          Dividends Payable $ 535,600.00 Payment Dividend Payable $                         535,600.00          Cash $ 535,600.00 Sneer Corporation Statement of Retained Earnings For Year Ended December 31 Retained Earnings, January 1 $                         860,000.00 Plus:    Net Income $                         360,000.00 Less:   Dividends declared on Preferred Stock $                       (160,000.00)             Dividends declared on Common Stock $                       (535,600.00) Retained Earnings, December 31 $                         524,400.00

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