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Chapter 13: Q7SE_1 (page 709)

Question: Accounting for cash dividends

Java Company earned net income of \(85,000 during the year ended December 31, 2018. On December 15, Java declared the annual cash dividend on its 4% preferred stock (par value, \)120,000) and a $0.25 per share cash dividend on its common stock (50,000 shares). Java then paid the dividends on January 4, 2019.

Requirements

1. Journalize for Java the entry declaring the cash dividends on December 15, 2018.

Short Answer

Expert verified

Answer

Cash Dividend will be debited with $17,300; Dividend payable- Preferred and Dividend payable- common will be credited with $4,800 and $12,500 respectively.

Step by step solution

01

Basic calculation

DividendPayablePreferred=PrefferedStock×DividendRate=$120,000×4%=$4,800DividendPayableCommon=NumberofCommonStock×DividendRate=$50,000×$0.25=$12,500

02

Journals of declaring dividend

Date

Transaction

Debit

Credit

2018 December 15

Cash Dividend

$17,300

Dividend payable- Preferred

$4,800

Dividend payable- common

$12,500

To record cash dividend declared

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Most popular questions from this chapter

A Identifying sources of equity, stock issuance, and dividends

Voyage Comfort Specialists, Inc. reported the following stockholders’ equity on its balance sheet at June 30, 2018:

Preferred Stock—7%, ? Par Value; 625,000 shares

authorized, 280,000 shares issued and outstanding

Paid-In Capital:

\( 1,400,000

1,340,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 2,900,000

Total Paid-In Capital 5,640,000

Retained Earnings 12,000,000

Total Stockholders’ Equity \) 17,640,000

Common Stock—$1 Par Value; 3,000,000 shares

authorized, 1,340,000 shares issued and outstanding

Requirements

1. Identify the different classes of stock that Voyage Comfort Specialists has outstanding.

What is the price/earnings ratio, and how is it calculated?

Where and how is treasury stock reported on the balance sheet?

Journalizing treasury stock transactions and reporting stockholders’ equity

Southern Amusements Corporation had the following stockholders’ equity on

November 30:

Paid-In Capital:

Common Stock—\(5 Par Value; 1,300 sharesauthorized, 250 shares issued and outstanding1,250

Retained Earnings50,000

Total Stockholders’ Equity \) 55,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 3,750

Total Paid-In Capital

\(5,000

On December 30, Southern purchased 200 shares of treasury stock at \)15 per share.

Requirements

1. Journalize the purchase of the treasury stock.

Computing rate of return on common stockholders’ equity Wyler, Inc.’s 2018 balance sheet reported the following items—with 2017 figures given for comparison:

Total Assets Total Liabilities and Stockholders’ Equity Total Liabilities Total Stockholders’ Equity (all common) WYLER, INC. Balance Sheet As of December 31, 2018, and December 31, 2017 \( 39,600 December 31, 2018 17,100 22,500 18,500 14,962 December 31, 2017 \) 39,600 \( 33,462 \) 33,462 Net income for 2018 was $3,690.

Compute Wyler’s rate of return on common stockholders’ equity for 2018.
See all solutions

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