#18) Gifford Corporation earned net income of $125,000 during the year ended Dec
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Question
#18) Gifford Corporation earned net income of $125,000 during the year ended December 31, 2014. On December 15, Gifford declared the annual cash dividend on its 4% preferred stock (15,000 shares with total par value of $150,000) and a $1.00 per share cash dividend on its common stock (45,000 shares with total par value of $450,000). Gifford then paid the dividends on January 4, 2015.
Journalize the following for Gifford Corporation:
a. Declaring the cash dividends on December 15, 2014
b. Paying the cash dividends on Januaary 4, 2015
Did Retained Earnings increase or decrease during 2014? By how much?
a. Journalize the Gifford Corporation the declaration for the cash dividends on December 15, 2014. (Record debits fir, then credits. Exclude explanations from any journal entries.)
Journal Entry
Accounts Debits Credits
2014
Dec 15 ( Accounts Payable, Cash, Dividends Payable, retained Earings) ________ _______
____________________________________________________ ________ _______
_____________________________________________________ _______ _______
____________________________________________________ _______ ______
Explanation / Answer
Preferred dividend = $150,000 x 4% = $6,000
Common dividend = $1 x 45,000 = $45,000
(a) Dec 15, 2014
DR Preferred Dividend $6,000
DR Common Dividend $45,000
Dividend payable $51,000
(To record declaration of preferred and common dividends)
(b) Jan 04, 2015
DR Dividend Payable $51,000
Cash $51,000
(To record payment of dividends previously declared)
(c)
Ending Retained earnings = Beginning retained earnings + Net income - Dividends paid
So, retained earnings will increase by $(125,000 - 51,000) = $74,000
NOTE: Journal entries are Accounting subject, not Finance. Please categorize questions under proper subject.
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