Question

P15.7 (LO 3) (Cash Dividend Entries) The books of Conchita Corporation carried the following account balances as of December 31, 2020. Cash 195,000 Preferred Stock (6% cumulative, 300,000 nonparticipating, $50 par) Common Stock (no-par value, 300,000 1,500,000 shares issued) Paid-in Capital in Excess of Par-Preferred 150,000 Stock Treasury Stock (common 2,800 shares at 33,600 cost) Retained Earnings 105,000 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 5.30 per share on the common. The dividends in arrears shall be paid by issuing 1,500 shares of treasury stock." At the date of declaration, the preferred is selling at $80 per share, and the common at $12 per share. Net income for 2021 is estimated at $77,000. Instructions a. Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously. b. Could Conchita Corporation give the preferred stockholders 2 years' dividends and common stockholders a 30 cents per share dividend, all in cash?

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Answer 1

Page: No o - Answer @ Journal entries On december 21, 2001) Dividend payable , cumulative preferred dividend arrearage 300,000 67. = $ 18000 Dividerd payable, Cumulative poeterred - 300,000 x 64. - $18000 Dividend payable, common = 300,000 shares X $0.30 | eshare É $90,000 Retained earnings = 18000 +18000 +90000 = $196000 Treasury esfochi = 1500 shares . x $la tahare = $78000 Dividend payable , common = 300,000 shares x$0.30 . 3 $90,000

Date Page. No Particular Debit | Credit Retained earnings $126000 decal 2001 dividend payable, cumulative prebered dividered $ 18000 Durecrage dividend payable , cumulative preterored $18000 Dividend payable , common $ 90,000 deral, Dividend payable, Preberred dividend avrearge $18000. 2001, Toreasury istock - $18000 dkcal, Dividend payable , cumulative poebevied $18000 2001 Dividend payable, common $90,000 causa *108,000 Yes, Conchita corporation can give the prebevred stockhold rents a yeass dividends & Common stoch holders a Bocents per shaire dividend, all in cash... Because to pay cash dividend, Conchita corporation must have retained earnings, Adequate cash and

Page No ③ declaration of dividend by brand of directors - In this dividend from retained earnings must be legal. For , Total dividend payable - $ 126000 there is ad equate cash = ($195000) Retained earnings = 105000 + 47000 = $ 182000 . In this situation, all the conditions mentioned above are Satisfied .. Conchita corporation can give the psebevred stockholders o years dividendis & common stockholders a 3ocents per share dividend, all in cash.