Question

The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $180,000 in the current year. It also declared and paid dividends on common stock in the amount of $2.80 per share. During the current year, Sneer had 1 million common shares authorized; 380,000 shares had been issued; and 172,000 shares were in treasury stock. The opening balance in Retained Earnings was $880,000 and Net Income for the current year was $380,000. Required: 1. Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer and Explanation:

The journal entries are shown below:

a. For preferred stock

Preferred dividend $180,000

To Preferred dividend payable $180,000

(Being the dividend declared is recorded)

Preferred dividend payable $180,000

To Cash $180,000

(Being the payment is recorded)

a. For common stock

Common dividend $582,400

To Common dividend payable $582,400

(Being the dividend declared is recorded)

Common dividend payable $582,400

To Cash $582,400

(Being the payment is recorded)

The computation is shown below:

= (380,000 shares - 172,000 shares) × $2.80

= $582,400