York's outstanding stock consists of 80,000 shares of noncumulative 7.5% preferred stock with a...

Question:

York's outstanding stock consists of 80,000 shares of noncumulative 7.5% preferred stock with a $5 par value and also 200,000 shares of common stock with a $1 par value. During its first four years of operation, the corporation declared and paid the following total cash dividends: 2015 total cash dividends $20,000 ; 2016 total cash dividends 28,000 ; 2017 total cash dividends 200,000 ; 2018 total cash dividends 350,000. Please explain how to journal this.

Cash Dividend:

The cash dividend is the amount that is paid to the shareholders of the company. It decreases the balance of the retained earnings and it is the expenses for the company.Hi,

Answer and Explanation:

Date Particular Debit $ Credit $
2015 Retained Earning a/c Dr 20,000
To, Dividend Payable a/c - Preferred Stock 20,000
Dividend Payable a/c - Preferred Stock 20,000
To, Cash a/c 20,000
2016 Retained Earning a/c Dr 28,000
To, Dividend Payable a/c - Preferred Stock 28,000
To, Dividend Payable a/c -Common Stock 0
Dividend Payable a/c - Preferred Stock 28,000
To, Cash a/c 28,000
2017 Retained Earning a/c Dr 200,000
To, Dividend Payable a/c - Preferred Stock 30,000
To, Dividend Payable a/c -Common Stock 170,000
Dividend Payable a/c - Preferred Stock 30,000
Dividend Payable a/c -Common Stock 170,000
To, Cash a/c 200,000
2018 Retained Earning a/c Dr 350,000
To, Dividend Payable a/c - Preferred Stock (7.5% x (80,000 x 5)) 30,000
To, Dividend Payable a/c -Common Stock 320,000
Dividend Payable a/c - Preferred Stock 30,000
Dividend Payable a/c -Common Stock 320,000
To, Cash a/c 350,000
1. The preferred stock gets the priority in the dividend first. The common stock gets the remaining dividend only.
2. In case of non-cumulative preferred stock, if the dividend declared is less than the rate of dividend, the
preferred stockholder gets only the declared dividend amount.


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Cash Dividends & Dividend Payment

from Finance 101: Principles of Finance

Chapter 16 / Lesson 1
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