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Q27E_2

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Horngren'S Financial And Managerial Accounting
Found in: Page 714

Short Answer

Computing dividends on preferred and common stock and journalizing

Northern Communications has the following stockholders’ equity on December 31,

2018:

Preferred Stock—5%, $11 Par Value; 150,000 shares authorized, 20,000 shares issued and outstanding

Paid-In Capital:

$ 220,000

760,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 680,000

Total Paid-In Capital 1,660,000

Retained Earnings 200,000

Total Stockholders’ Equity $ 1,860,000

Common Stock—$2 Par Value; 575,000 shares

authorized, 380,000 shares issued and outstanding

Requirements

2. Record the journal entries for 2018, assuming that Northern Communications declared the dividend on December 1 for stockholders of record on December 10. Northern Communications paid the dividend on December 20.

Dividend: Preferred stock will be debited with $11,000; Cash and Shareholders for dividends will be credited with $9,000 and $2,000, respectively.

See the step by step solution

Step by Step Solution

Step 1: Basic Introduction

Stock dividend: $11,000

Preferred stock dividend paid: $9,000

Preferred stock dividend in arrears: $2,000

Common stock dividend paid: $0

Step 2: Journals

Date

Transaction

Debit

Credit

Dec 31

Dividend- Preferred stock

$11,000

Cash

$9,000

Shareholders for dividends

$2,000

To record dividend declared

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