Question

Yougi Corp. is an animation studio operating in South Florida. A recent press release contained the following information:

April 1—Yougi Corp. today announced that its Board of Directors has declared a cash dividend of $0.40 per share on 685,000 outstanding preferred shares. The dividend will be paid on or before May 31, to preferred shareholders of record at the close of business on May 26. The Company's fiscal year will end on June 30.

Required:

1.

Prepare any journal entries that Yougi Corp. should make on the four dates mentioned in the press release. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 2. What would the board of directors have considered before making the dividend decision? The board must consider the balances of common stock and cash before declaring a cash dividend. The board must consider the balances of retained earnings and cash before declaring a cash dividend.

Answer 1

Date	account titles and explanation	debit	credit
April 1	dividends (68500*0.40)	27400
	Dividends payable, preferred		27400
May 26	no journal entry is required
May 31	dividends payable, preferred	27400
	Cash		27400
June 30	retained earnings	27400
	Dividends		27400

Answer :2

Option B The board must consider the balances of retained earnings and cash before declaring a cash dividend.

(because reserve for dividend is made from retained earnings)