Question

Following are four separate dividend scenarios. a. On April 1, 2020, Meriter Corporation declared a cash dividend of $5.00 per share on its 12,800 outstanding shares of common stock ($1 par). The dividend is payable on April 21, 2020, to stockholders of record on April 14, 2020. b. Axe Co. has issued and outstanding 400 shares of $100 par, cumulative, 5% preferred stock and 8,000 shares of $5 par common stock. Dividends are in arrears for the past year (not including the current year). On December 15, 2020, the board of directors of Axe Co. declared dividends of $10,000 to be paid to shareholders at the end of its fiscal year. c. Siri Corp. holds 400 shares of Mobile Co. common stock, purchased at the beginning of the year for $30 a share (carrying value on February 1, 2020). On February 1, 2020, Siri Corp. declared a property dividend of 180 shares of Mobile Co. common stock when the shares were selling at $28 per share. d. Treck Corporation declared a common stock dividend of $18,000 on April 1, 2020. Treck Corporation announced to shareholders that 70% of the dividend amount was a return of capital.

Answer 1

Question Completion:

Record the dividend declarations.

Answer:

Separate Dividend Scenarios

a. Meriter Corporation

April 1, 2020

Debit Cash Dividend $64,000

Credit Dividends Payable $64,000

To record the declaration of a cash dividend of $5.00 per share on its 12,800 outstanding shares of common stock, payable on April 21, 2020, to stockholders of record on April 14, 2020.

b. Axe Co.

December 15, 2020

Debit Cash Dividend:

Cumulative Preferred Stock $4,000

Common Stock $6,000

Credit Dividends Payable $10,000

To record the declaration of dividend to cumulative preferred and common stockholders.

c. Siri Corp.

February 1, 2020

Debit Property Dividend $5,400

Credit Mobile Co. Investment $5,400

To record the declaration of property dividend of 180 shares of Mobile Co. common stock.

d. Treck Corporation

April 1, 2020

Debit Common stock dividend $5,400

Debit Common stock $12,600

Credit Retained Earnings $18,000

To record the declaration of stock dividend and 70% in return of capital.

Step-by-step explanation:

1. Data and Analysis:

a. Meriter Corporation

April 1, 2020 Cash Dividend $64,000 Dividends Payable $64,000

a cash dividend of $5.00 per share on its 12,800 outstanding shares of common stock, payable on April 21, 2020, to stockholders of record on April 14, 2020.

b. Axe Co.

December 15, 2020

Cash Dividend $10,000 Dividends Payable $10,000

Preferred stockholders $4,000 Common stockholders $6,000

Preferred stock = $40,000 (400 shares * $100)

Cumulative preferred dividend = $2,000 (5% of $40,000)

2019 Cumulative preferred dividend = $2,000

Total preferred dividend = $4,000

Common stock dividend = $6,000 ($10,000 - $4,000)

c. Siri Corp.

February 1, 2020

Property Dividend $5,400 Mobile Co. Investment $5,400

d. Treck Corporation

April 1, 2020

Common stock dividend $5,400 Common stock $12,600 Retained Earnings $18,000

70% of the dividend amount was a return of capital.