Knudsen Corporation was organized on January 1, 2016. During its first year, the
ID: 2604012 • Letter: K
Question
Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $5,000; 2017, $12,000; and 2018, $28,000.
2016
2017
2018
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2016
2017
2018
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Date
Account Titles and Explanation
Debit
Credit
Knudsen Corporation was organized on January 1, 2016. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2016, $5,000; 2017, $12,000; and 2018, $28,000.
Explanation / Answer
ans)
a) 2016 2017 2018
Dividends declared 5000 12000 28000
Allocation to preferred 5000 6000* 6000
Remainder to Common --- 6000 22000
* 2000 X 50 X 6% = 6000
b) 2016 2017 2018
Dividends declared 5000 12000 28000
Dividends in arrears 2000*
Allocation to preferred 5000 7000** 7000
Remainder to common ---- 3000 21000
CALCULATION FOR PREFERRED STOCK DIVIDEND
2000 X 50 X 7% = 7000
CALCULATION FOR DIVIDENDS IN ARREARS:
P/S Dividend (what they SHOULD receive) $7,000
2016 P/S Dividend paid (what they DID receive) 5,000
$3,000 Dividends in arrears
C) Dec 31 Retained earnings 28000
Dividends payable 28000
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