Nowell Inc. had the following stock issued and outstanding at January 1, 2016 1.
ID: 2534835 • Letter: N
Question
Nowell Inc. had the following stock issued and outstanding at January 1, 2016 1. 65,000 shares of no-par common stock. 2. 9,900 shares of $120 par, 7 percent, cumulative preferred stock. (Dividends are in arrears for one year 2015.) On March 8, 2016, Nowell declared a $181,420 cash dividend to be paid March 31 to shareholders of record on March 20 Required a. What amount of dividends will be paid to the preferred shareholders versus the common shareholders? (Amounts to be deducted should be indicated with minus sign.) Distributed to Shareholders Amount Preferred Common Total dividend declared Preferred arrearage Current preferred dividend Available for common Distributed to common Total distribution b. Prepare the journal entries required for these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list On March 8, Nowell declared a $181,420 cash dividend to be paid March 31. 1 ch 31 2 The shareholders on record on March 20 will receive a dividend payment to be paid March 31 3 On March 31, the dividends are paid to the shareholders of record on March 20 Credit On December 31, the closing entry for dividends is recorded 4 Note journal entry has been enteredExplanation / Answer
Answers
Distributed to shareholders
Amount
Preferred
Common
Total Dividend declared
$ 1,81,420.00
Preferred Arrearage [9900 x $120 par x 7% x 1 year]
$ (83,160.00)
$ 83,160.00
Current Preferred dividend [9900 x $120 par x 7% x 1 year]
$ (83,160.00)
$ 83,160.00
Available for common
$ 15,100.00
Distributed to common
$ (15,100.00)
$ 15,100.00
Total distribution
$ -
$ 1,66,320.00
$ 15,100.00
Date
Accounts Title
Debit
Credit
08-Mar
Dividends
$ 1,81,420.00
Dividends payable
$ 1,81,420.00
(dividend declared)
31-Mar
Dividends payable
$ 1,81,420.00
Cash
$ 1,81,420.00
(dividend distributed)
31-Dec
Retained Earnings
$ 1,81,420.00
Dividends
$ 1,81,420.00
(dividend account closed)
Distributed to shareholders
Amount
Preferred
Common
Total Dividend declared
$ 1,81,420.00
Preferred Arrearage [9900 x $120 par x 7% x 1 year]
$ (83,160.00)
$ 83,160.00
Current Preferred dividend [9900 x $120 par x 7% x 1 year]
$ (83,160.00)
$ 83,160.00
Available for common
$ 15,100.00
Distributed to common
$ (15,100.00)
$ 15,100.00
Total distribution
$ -
$ 1,66,320.00
$ 15,100.00
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