E11-11 Recording the Payment of Dividends and Preparing a Statement of Retained
ID: 2462325 • Letter: E
Question
E11-11 Recording the Payment of Dividends and Preparing a Statement of Retained Earnings
The 2012 annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $100,000 in 2012. It also declared and paid dividends on common stock in the amount of $2 per share. During 2012, Sneer had 1,000,000 common shares authorized; 300,000 shares had been issued; 100,000 shares were in treasury stock. The balance in Retained Earnings was $800,000 on December 31, 2011, and 2012 Net Income was $300,000.
Required:
1. Prepare journal entries to record the declaration, and payment, of
dividends on (a) preferred and (b) common stock.
2. Using the information given above, prepare a Statement of Retained Earnings for the year ended December 31, 2013.
Explanation / Answer
Preferred Stock Declaration Dividends Declared $ 100,000.00 Dividends Payable $ 100,000.00 Payment Dividend Payable $ 100,000.00 Cash $ 100,000.00 Dividends are paid on shares that are issued and outstanding. Dividends are not paid on treasury stock. Shares Issued $ 300,000.00 treasury Stock $ 100,000.00 Shares Outstanding $ 200,000.00 Dividend Per Share $ 2.00 Total Dividend paid $ 400,000.00 Declaration Dividends Declared $ 400,000.00 Dividends Payable $ 400,000.00 Payment Dividend Payable $ 400,000.00 Cash $ 400,000.00 Sneer Corporation Statement of Retained Earnings For Year Ended December 31 Retained Earnings, January 1 $ 800,000.00 Plus: Net Income $ 300,000.00 Less: Dividends declared on Preferred Stock $ (100,000.00) Dividends declared on Common Stock $ (400,000.00) Retained Earnings, December 31 $ 600,000.00
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