Question

Cash Dividends Rock Corporation has the following shares outstanding: 8,000 shares of $40 par value, ten...

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.

Homework Answers

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.
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