Question

On February 1, 2018, Fickle Feline Inc. declared $182,000 of dividends payable to stockholders on February 15, 2018. There are 25,700, $3 par value common shares and 14,200, 4%, $5 par value cumulative preferred shares. No new stock was issued during the year and dividends were last declared in 2015. Fickle Feline Inc. had retained earnings of $2,661,000 at the beginning of 2018 and earned a net income of $690,000 during the year. Write the journal entry to record the declaration and subsequent payout of the dividends on February 28, 2018. The company uses the cash dividends method to record dividends.

Date	Account Title & Explanation	Debit	Credit
Feb 1	Cash Dividends- Common
	Cash Dividends- preferred, cumulative
	Dividends Payable
Feb 28	Dividends Payable
	Cash

Answer 1

Date	Account Title & Explanation	Debit	Credit
Feb-01	Cash Dividends- Common	$ 1,76,320.00
	Cash Dividends- preferred, cumulative	$      5,680.00
	Dividends Payable		$ 1,82,000.00
	(To record declaration of Dividend)
Feb-28	Dividends Payable	$ 1,82,000.00
	Cash		$   1,82,000.00
	(To record payment of Dividend)

	Par Value per Preferred share	Dividend rate	Annual Preferred dividend
Annual Prefered Dividend:	71000	4.00%	$         2,840.00
	Total Cash dividend Paid	Paid to Preferred	Paid to common	Dividends in arear at year-end
2016				$         2,840.00
2017	$ 1,82,000.00	$         5,680.00	$   1,76,320.00
				$                      -
				$                      -
Total	$ 1,82,000.00	$         5,680.00	$   1,76,320.00

Alternate solution

Date	Account Title & Explanation	Debit	Credit
Feb-01	Cash Dividends- Common	$ 1,73,480.00
	Cash Dividends- preferred, cumulative	$      8,520.00
	Dividends Payable		$ 1,82,000.00
	(To record declaration of Dividend)
Feb-28	Dividends Payable	$ 1,82,000.00
	Cash		$   1,82,000.00
	(To record payment of Dividend)

Since prefrence stock is cumulative , Prefrence dividend will be paid for 2016, 2017, and 2018.

	Par Value per Preferred share	Dividend rate	Annual Preferred dividend
Annual Prefered Dividend:	71000	4.00%	$         2,840.00
	Total Cash dividend Paid	Paid to Preferred	Paid to common	Dividends in arear at year-end
2016				$         2,840.00
2017				$         5,680.00
2018	$ 1,82,000.00	$         8,520.00	$   1,73,480.00	$ 0.00