Nautical has two classes of stock authorized: $10 par preferred, and $1 par valu

Question

Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2015, 150 shares of preferred stock and 1,900 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2015:

  

Declare a cash dividend on both common and preferred stock of $0.55 per share to all stockholders of record on June 15.

   

Nautical has the following beginning balances in its stockholders’ equity accounts on January 1, 2015: Preferred Stock, $1,500; Common Stock, $1,900; Paid-in Capital, $18,400; and Retained Earnings, $10,400. Net income for the year ended December 31, 2015, is $7,100.

Record each of these transactions.

Declare a cash dividend on both common and preferred stock of $0.55 per share to all stockholders of record on June 15. Record the declaration of cash dividends.

Declare a cash dividend on both common and preferred stock of $0.55 per share to all stockholders of record on June 15. Record the entry on the date of record.

Select whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders’ equity by completing the following table.

Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2015, 150 shares of preferred stock and 1,900 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2015:

Total Transaction Total Assets Total Liabilities Stockholders Equity Issue common stock Issue preferred stock Declare cash dividends Pay cash dividends Repurchase treasury stock Reissue treasury stock

Explanation / Answer

1) Recording of Transactions:

a) Declare a cash dividend on both common and preferred stock of $0.55 per share to all stockholders of record on June 15. Record the declaration of cash dividends.

Cash Dividend --- Dr. $1045

Cash Dividend to Preferred Stock --- Dr. $ 82.50

Cash Dividend payable A/c $1127.50

b) Declare a cash dividend on both common and preferred stock of $0.55 per share to all stockholders of record on June 15. Record the entry on the date of record.

Cash Dividend --- Dr. $1045

Cash Dividend to Preferred Stock --- Dr. $ 82.50

Cash Dividend payable A/c $1045

Cash Dividend payable to Preferred Stock $ 82.50

2) Select whether each of these transactions would increase (+), decrease (), on total assets, total liabilities, and total stockholders’ equity by completing the following table:

Transaction Total Assets Total Liabilities Total Stockholders' Equity Issue common stock increase (cash) increase (share capital over the par value) increase (common shares at par value) Issue preferred stock increase (cash) Increase (preferred stock) Declare cash dividends Increase (Cash dividend payable) & decrease (retained earnings) Pay cash dividends decrease (cash) decrease (cash dividend payable) Repurchase treasury stock decrease (cash) and increase (treasury stock) Reissue treasury stock increase (cash) and decrease (treasury stock) increase (retained earnings with profit on reissue)

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