Question

Western Communications has the following stockholders' equity on December 31, 2018: (Click on the icon to view the stockholders' equity) Read the requirements. Requirement 1. Assuming the preferred stock is cumulative, compute the amount of dividends to preferred stockholders and to common stockholders for 2018 and 2019 if total dividends are $19,870 in 2018 and $49,000 in 2019. Assume no changes in preferred stock and common stock in 2019. (Assume all preferred dividends have been paid prior to 2018. Complete all input boxes. Enter a "0" for zero amounts. For the current year preferred dividend, be sure to enter the calculated dividend on the "current year dividend" line and the paid out dividend on the "total dividend to preferred stockholders" line.) Western's 2018 dividend would be divided between preferred and common stockholders in this manner: 19,870 Total Dividend—2018 Dividend to preferred stockholders: Dividend in arrears 19,870 Current year dividend Total dividend to preferred stockholders 19,870 Dividend to common otrolholders

Answer 1

Western Communications Requirement 1 Total Dividend-2018 19,870 9% x $9 x 27,000 shares $ Dividend to Preferred Stockholders 21,870 Current Year Dividend (2018) (19,870) Dividend to Common Stockholders Total Dividend–2019 49,000 9% x $9 × 27,000 shares $21,870 -$19,870 Dividend to Preferred Stockholders Dividends in Arrears (2018) Current Year Dividend (2015) Dividend to Common Stockholders 2,000 21,870 $ (23,870) 25,130 Requirement 2 Accounts and Explanation Date Debit Credit 2018 Retained Earnings Dividends Payable Preferred Declared a cash dividend. Dec. 1 19,870 19,870 Dividends Payable-Preferred Dec. 20 19,870 Cash 19,870 Payment of cash dividend. %24