Question

Cash Dividends on Common and Preferred Stock Lemon Inc. has the following information regarding its preferred and common stock: Preferred stock, $30 par, 12% cumulative; 300,000 shares authorized; 150,000 shares issued and outstanding Common stock, $2 par; 2,500,000 shares authorized; 1,200,000 shares issued; 1,000,000 outstanding As of December 31, 2019, Lemon was 3 years in arrears on its dividends. During 2020, Lemon declared and paid dividends. As a result, the common stockholders received dividends of $0.45 per share. Required: 1. What was the total amount of dividends declared and paid during 2020? Total dividends declared and paid $fill in the blank c3f04df87fe8040_1 2. During 2020, what journal entry was made at the date of declaration?

Answer 1

1. $2,610,000

2. Dr Dividends $2,610,000

Cr Dividends Payable $2,610,000

Step-by-step explanation:

1. Calculation to determine the total amount of dividends declared and paid during 2020

Arrear Preferred Dividends $1,620,000 (150,000*30*12%*3 years)

Add Current Preferred Dividends $540,000 (150,000*30*12%)

Add Common stock Dividends $450,000 (1,000,000*$0.45 )

Total amount of dividends declared and paid $2,610,000

Therefore the total amount of dividends declared and paid during 2020 is $2,610,000

2. Preparation of the journal entry was made at the date of declaration

Dr Dividends $2,610,000

Cr Dividends Payable $2,610,000

Required: 1. What was ? Total dividends declared and paid $fill in the blank c3f04df87fe8040_1 2. During 2020, what journal entry was made at the date of declaration?