Question

The following elements of stockholders' equity are from the balance sheet of Sanderson Marketing Corp. at December 31, 2017: (Click on the icon to view the data.) Sanderson paid no preferred dividends in 2017. Read the requirements Requirement 1. Compute the dividends to the preferred and common shareholders for 2018 if total dividends are $150,000 and assuming the preferred stock is noncumulative. Assume no changes in preferred and common stock in 2018. (Complete all input boxes. Enter "0" for any zero amounts.) Sanderson's 2018 dividend would be divided between preferred and common stockholders in this manner: 0 Data Table Total Dividend-2018 Dividend to preferred stockholders: Dividend in arrears Current year dividend Total dividend to preferred stockholders Dividend to common stockholders Stockholders' Equity Paid-In Capital: Preferred Stock-5%, $2 Par Value; 110,000 shares authorized, 65,000 shares issued and outstanding Common Stock-$0.10 Par Value; 9,500,000 shares authorized, 8,750,000 shares issued and outstanding $ 130,000 875,000 i Requirements 1. Compute the dividends to the preferred and common shareholders for 2018 if total dividends are $150,000 and assuming the preferred stock is noncumulative. Assume no changes in preferred and common stock in 2018. 2. Record the journal entries for 2018 assuming that Sanderson Marketing Corp. declared the dividends on July 1 for stockholders of record on July 15. Sanderson paid the dividends on July 31.

Answer 1

Sanderson Marketing Corp.

1.

Total Dividend - 2018		150000
Dividend to preferred stockholders:
Dividend in arrears	0
Current year dividend (5% x $130000)	6500
Total dividend to preferred stockholders		6500
Dividend to common stockholders		143500

2.

Date	General Journal	Debit	Credit
July 1, 2018	Cash dividends	150000
	Dividends payable - Preferred		6500
	Dividends payable - Common		143500
	(To record the declaration of dividends)
July 15, 2018	No journal entry required
July 31, 2018	Dividends payable - Preferred	6500
	Dividends payable - Common	143500
	Cash		150000
	(To record the payment of dividends)

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