Question

Cash Dividends
Rock Corporation has the following shares outstanding: 8,000 shares of $40 par value, ten percent preferred stock and 50,000 shares of $2 par value common stock. The company has $428,000 of retained earnings. At year-end, the company declares its regular $4 per share cash dividend on the preferred stock and a $3.20 per share cash dividend on the common stock. Two weeks later, the company pays the dividends.

a. Prepare the journal entry for the declaration of the cash dividends.

b. Prepare the journal entry for the payment of the cash dividends.

A.

Cash Dividends Debit _______ Credit ______ Dividends payable-Preferred Stock Debit _________ Crdit ________ Dividends Payable-Common Stock Debit _________- Credit ________ To record declaration of cash dividends. B. Dividends payable-Preferred stock Debit _________ Credit ________ Dividends payable-Common Stock Debit_________ Credit _________ Cash Debit _________ Credit _________ To record payment of dividends.

Answer 1

A
	Debit	Credit
Cash Dividends	192000
Dividends payable-Preferred Stock		32000	=8000*4
Dividends Payable-Common Stock		160000	=50000*3.2
To record declaration of cash dividends.
B
	Debit	Credit
Dividends payable-Preferred stock	32000
Dividends payable-Common Stock	160000
Cash		192000
To record payment of dividends.