Question

The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $220,000 in the current year. It also declared and paid dividends on common stock in the amount of $1.80 per share. During the current year, Sneer had 1 million common shares authorized; 420,000 shares had been issued; and 208,000 shares were in treasury stock. The opening balance in Retained Earnings was $780,000 and Net Income for the current year was $280,000.

Required:
a. Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock.

Answer 1

1) Journal entry

No. Account and explanation debit credit

a Cash dividend 220000

Preferred Dividend payable 220000

(To record dividend declared)

b Preferred dividend payable 220000

Cash 220000

(To record dividend paid)

C Cash dividend (420000-208000)*1.8 381600

Common Dividend payable 381600

(To record dividend declared)

d Common Dividend payable 381600

Cash 381600

(To record dividend paid)