Question

Trainor Corporation was organized on January 1, 2014. During its first year, the corporation issued 20,000...

Trainor Corporation was organized on January 1, 2014. During its first year, the corporation issued 20,000 preferred shares with a $0.30 dividend entitlement and 200,000 common shares, both at $1 per share. At December 31, the corporation’s year end, Trainor declared the following cash dividends:

                            Preferred shares                 Common Shares

       2014             $0.25 per share                              $0.00

       2015             as required by terms                      $0.05 per share

       2016             as required by terms                      $0.15 per share

Instructions

a.    Calculate the total dividends and the amount paid to each class of shares, assuming the preferred dividend is not cumulative.

b.    Calculate the total dividends and the amount paid to each class of shares, assuming the preferred dividend is cumulative.

c.    Journalize the declaration of the cash dividend at December 31, 2015 using the assumption of part b.

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Answer #1
Trainor Corporation
Part A - Pereferred dividend is not cumulative
PS CS
2014- 0.25 * 20000 =
5000 0
2015- 0.3 * 20000 = 0.05 * 200000
6000 10000
2016- 0.3 * 20000 = 0.15 * 200000
6000 30000
Part B - Pereferred dividend is cumulative
PS CS
2014- 0.25 * 20000 =
5000 0
2015- (0.3 * 20000) + ( 0.05 * 20000 )arrear= 0.05 * 200000
7000 10000
2016- 0.3 * 20000 = 0.15 * 200000
6000 30000
Part C
Cash dividend 17000
Preferred dividend payable 7000
Common dividend payable 10000
( to record the declaration of dividend )
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