Question: Accounting for cash dividends
Java Company earned net income of $85,000 during the year ended December 31, 2018. On December 15, Java declared the annual cash dividend on its 4% preferred stock (par value, $120,000) and a $0.25 per share cash dividend on its common stock (50,000 shares). Java then paid the dividends on January 4, 2019.
2. Journalize for Java the entry paying the cash dividends on January 4, 2019.
Dividend payable- Preferred and Dividend payable- common will be debited with $4,800 and $12,500 respectively: Cash Dividend will be credited with $17,300.
2019 Jan 4
Dividend payable- Preferred
Dividend payable- Common
To record payment of dividend
Journalizing a stock dividend and reporting stockholders’ equity
The stockholders’ equity of Lakeside Occupational Therapy, Inc. on December 31, 2017, follows:
Common Stock—$1 Par Value; 1,200 shares
authorized, 400 shares issued and outstanding
Total Stockholders’ Equity $ 122,000
Paid-In Capital in Excess of Par—Common 1,600
Total Paid-In Capital
On April 30, 2018, the market price of Lakeside’s common stock was $16 per share and the company declared a 13% stock dividend. The stock was distributed on May 15.
1. Journalize the declaration and distribution of the stock dividend.
2. Prepare the stockholders’ equity section of the balance sheet as of May 31, 2018. Assume Retained Earnings are $120,000 on April 30, 2018, before the stock dividend, and the only change made to Retained Earnings before preparing the balance sheet was closing the Stock Dividends account.
Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity
Bianchi Company reported these figures for 2018 and 2017:
Net Income $ 34,380 $ 18,000
Dec. 31, 2018 Dec. 31, 2017
Total Assets $ 285,000 $ 280,000
Preferred Stock—11%, $9 Par Value; 60,000 shares
authorized, 12,000 shares issued and outstanding
$ 108,000 $ 108,000
Common Stock—$2 Par Value; 60,000 shares
authorized, 50,000 shares issued and outstanding
Paid-In Capital in Excess of Par—Common 14,000 14,000
Retained Earnings 60,500 38,000
Total Stockholders’ Equity $ 282,500 $ 260,000
3. Compute Bianchi Company’s rate of return on common stockholders’ equity for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest whole percent.
Match the accounting terminology to the definitions.
1. Factoring receivables a. A monetary claim against a business or an individual.
2. Debtor b. The party to a transaction who takes on an obligation/payable.
3. Accounts receivable c. Using receivables as security (collateral) for a loan.
4. Maturity date d. The right to receive cash in the future from customers for goods sold or for services provided.
5. Receivable e. The date when a note is due.
6. Pledging receivables f. Selling receivables to a finance company or bank.
Question: Copperhead Trust has the following classes of stock:
Preferred Stock—6%, $12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding
Common Stock—$0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding
2. Assume the preferred stock is cumulative and Copperhead passed the preferred dividend in 2016 and 2017. In 2018, the company declares cash dividends of $46,000. How much of the dividend goes to preferred stockholders? How much goes to common stockholders?
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