Question

Question 7 --/1 View Policies Current Attempt in Progress The books of Monty Corporation carried the following account balances as of December 31, 2020. Cash Preferred Stock (6% cumulative, nonparticipating, $50 par) Common Stock (no-par value, 320,000 shares issued) Paid-in Capital in Excess of Par-Preferred Stock Treasury Stock (common 2,600 shares at cost) Retained Earnings $ 175,000 296,000 1,600,000 146,000 32,000 104,300 The company decided not to pay any dividends in 2020. The board of directors, at their annual meeting on December 21, 2021, declared the following: "The current year dividends shall be 6% on the preferred and $0.40 per share on the common. The dividends in arrears shall be paid by issuing 1,480 shares of treasury stock." At the date of declaration, the preferred is selling at $74 per share, and the common at $12 per share. Net income for 2021 is estimated at $83,200. (a) Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter Ofor the amounts. Round answers to decimal places, e.g. 3,487.)

Answer 1

Journal Entry Debit Credit Dx. 17760 17760 Account Titles and explanation for Preferred dividends in arrears: d. Retained earnings (296000x 6%) To Preferred dividend Payable (Being preferred dividend in arrears recorded) 2. Preferred dividend Payable To Treasury stock (1480 shares x12.) (Being payment of preferred dividend by issuing treasury stock) Dr. 17760 17760 for Preferred current year dividend to 17760 Retained Earnings (296000x6%) Dr. 17760 To Preferred dividend payable. (Being recording of preferred dévidend) 17760 2. Preferred dividend payable Dr. 17760 To Cash (Being Payment of Preferred dividend)

for common share dividend 1. Retained Earnings Dr. 117952 (296000 -2600 +1480) shares x 0.40 To common stock dividend Payable (Being dividend on common stock record) 117952 Dr. 117952 117952 2. Common stock dividend payable To cash (Being payment of dividend) ($) 175000 Part B :- Total Available Cash less! Preferred stock dividend in arrears 17760 less: Preferred stock dividend Current 17760 less: Gout common stock dividend current 117952 Balance Cash. (153472) $ 21528