6 Dividend Transactions (5 points) The RST Company Board of Directors authorized

Question

6 Dividend Transactions (5 points) The RST Company Board of Directors authorized 10,000,000 shares of $2 par common stock and 10,000 shares of $100 par 9% preferred stock There are 1,000,000 shares of common issued and 950,000 shares outstanding. There are 10,000 shares of the preferred stock issued and outstanding 5) Aug 1, Year 1 the RST Company declared dividends of $.60 per common share, elus dividends on preferred stock payable on Sept 1 to all shareholders of record on Aug 15. Give the entries on the - date of declaration, * date of record and date of payment 1-Aug 15-Aug 1-Sep ct 204 Final Fall 2017 Page 12A

Explanation / Answer

Equity dividend = $950000*0.60 = $570000
Preferred dividend = 10000*$100*9% = $90000.

Date of declaration is the date on which the dividends are declared.
Entry to be passed:
Aug-1:
Equity dividends $570000
Preferred dividends $90000
   Dividends payable $660000
15-Aug
No entry is required to be passed
1-Sept:
Dividends payable $660000
   Cash $660000

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