Question

Question 11 (8 points) On December 31, 2015, Alpha Corporation has outstanding 1,000 shares of $100 par value, 7% cumulative and nonparticipating preferred stock, and 20,000 shares of $10 par value common stock. No dividends were paid in 2015. During 2016, Alpha distributed $40,000 in dividends. Use this information to determine for the 2016 the dollar amount of dividends that will be distributed to: 1. Preferred Stock 2. Common Stock Question 12 (6 points) On January 1, 2016, Alpha Corporation had 200,000 shares of common stock outstanding with a par value of $3 per share. On March 31, Alpha Corporation declared a 10% stock dividend when the market value was $10 per share. Use this information to prepare the General Journal entry (without explanation) for March 31. If no entry is required then write "No Entry Required." D OC - Format BI U - General Journal:

Answer 1

Question 11:

Preferred Stock:

2015 Arrears = 1,000 × $100 × 7% = $7,000

2016 1,000 × $100 × 7% = $7,000

Total $14,000

Common Stock:

2016 $40,000 - $14,000. = $26,000

Preferred Stock = $14,000

Common Stock = $26,000

Cumulative preferred stock is a class of stock that where undeclared dividends are allowed to accumulate until they are paid. In other words, it’s a type of preferred stock that has a right to a specific amount of dividends each year. If the dividends aren’t declared or paid, the stock can accumulate the unpaid dividends for a future date when they are declared.
Non-participating preferred stock is preferred stock that specifically limits the amount of dividends paid to its holders. This usually means that there is a specifically-mandated dividend percentage stated on the face of the stock certificate. If the board of directors decides to also pay out a dividend to the common stockholders, this dividend is not also paid to the holders of the non-participating preferred stock. Thus, there is a cap on the amount of distributions allowed to the holders of this type of stock.

Question 12:

March 31,2016

Dividends Dr.(200,000shares*$3*10%) 60,000

To Dividend Payable 60,000

The part of the annual profit of a company distributed among its shareholders is called dividend. The dividend is always declared by the company on the face value (FV) of a share irrespective of its market value. The rate of dividend is expressed as a percentage of the face value of a share per annum.