The stockholders\' equity section of Ellis Corporation at December 31, 2017, inc
ID: 2417919 • Letter: T
Question
The stockholders' equity section of Ellis Corporation at December 31, 2017, included the following:
6% preferred stock, $100 par value, cumulative,
10,000 shares authorized, 8,000 shares issued and outstanding......... $ 800,000
Common stock, $10 par value, 250,000 shares authorized,
200,000 shares issued and outstanding .............................................. $2,000,000
Dividends were not declared on the preferred stock in 2017 and are in arrears.
On September 15, 2018, the board of directors of Ellis Corporation declared dividends on the preferred stock for 2017 and 2018, to stockholders of record on October 1, 2018, payable on October 15, 2018.
On November 1, 2018, the board of directors declared a $.90 per share dividend on the common stock, payable November 30, 2018, to stockholders of record on November 15, 2018.
Instructions
Prepare the journal entries that should be made by Ellis Corporation on the dates indicated below:
September 15, 2018 November 1, 2018
October 1, 2018 November 15, 2018
October 15, 2018 November 30, 2018
Explanation / Answer
Journal Entries
Date
Accounts Titles and Explanations
Debit
Credit
September 15, 2018
Retained Earnings
$ 96,000
Preferred Dividend Payable
$ 96,000
(Being dividend declared on Prefered Stock)
For 2 years = Par value * Dividend % * 2 =800000*6%*2 = $96000
October 1, 2018
No entry Required
October 15, 2018
Preferred Dividend Payable
$ 96,000
Cash
$ 96,000
(Being dividend paid in cash)
November 1, 2018
Retained Earnings
$ 1,800,000
Common Dividend Payable
$ 1,800,000
(Being dividend declared on Common Stock)
2,000,000 shares * $0.90 = $1800,000
November 15, 2018
No entry Required
November 30, 2018
Common Dividend Payable
$ 1,800,000
Cash
$ 1,800,000
(Being dividend paid in cash)
Journal Entries
Date
Accounts Titles and Explanations
Debit
Credit
September 15, 2018
Retained Earnings
$ 96,000
Preferred Dividend Payable
$ 96,000
(Being dividend declared on Prefered Stock)
For 2 years = Par value * Dividend % * 2 =800000*6%*2 = $96000
October 1, 2018
No entry Required
October 15, 2018
Preferred Dividend Payable
$ 96,000
Cash
$ 96,000
(Being dividend paid in cash)
November 1, 2018
Retained Earnings
$ 1,800,000
Common Dividend Payable
$ 1,800,000
(Being dividend declared on Common Stock)
2,000,000 shares * $0.90 = $1800,000
November 15, 2018
No entry Required
November 30, 2018
Common Dividend Payable
$ 1,800,000
Cash
$ 1,800,000
(Being dividend paid in cash)
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