Cash Dividends Sanders Corporation has the following shares outstanding: 6,000 s

Question

Cash Dividends

Sanders Corporation has the following shares outstanding: 6,000 shares of $50 par value, eight percent preferred stock and 40,000 shares of $1 par value common stock. The company has $328,000 of retained earnings. At year-end, the company declares its regular $4 per share cash dividend on the preferred stock and a $3.3 per share cash dividend on the common stock. Three weeks later, the company pays the dividends.

a. Prepare the journal entry for the declaration of the cash dividends.
b. Prepare the journal entry for the payment of the cash dividends.

General Journal Ref. Description Debit Credit a. AnswerCash DividendsDividends Payable - Preferred StockDividends Payable - Common StockCash $Answer $Answer AnswerCash DividendsDividends Payable - Preferred StockDividends Payable - Common StockCash Answer Answer Dividends Payable - Common Stock Answer Answer To record declaration of dividend on preferred stock and
common stock. b. AnswerCash DividendsDividends Payable - Preferred StockDividends Payable - Common StockCash Answer Answer Dividends Payable - Common Stock Answer Answer AnswerCash DividendsDividends Payable - Preferred StockDividends Payable - Common StockCash Answer Answer To record payment of dividends on preferred and common stocks.

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Cash dividend 156000 Dividends Payable - Preferred Stock (6000*4) 24000 Dividends Payable - Common Stock (40000*3.3) 132000 To record declaration of dividend on preferred stock and
common stock. Dividends Payable - Preferred Stock 24000 Dividends Payable - Common Stock 132000 Cash 156000 To record payment of dividends on preferred and common stocks.

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