Exercise 11-10  Cash Dividends

 

The Stockholders’ Equity category of Jackson Company’s balance sheet as of January 1, 2014, appeared as follows:

 

Preferred stock, $100 par, 8%, 2,000 shares

 

issued and outstanding                                                    $200,000 Common stock, $10 par, 5,000 shares issued

 

 

LO5

 

EXAMPLE  11-5, 11-6

 

and outstanding	50,000
Additional paid-in capital	300,000
Total contributed capital	$550,000
Retained earnings	400,000
Total stockholders’ equity	$950,000

 

The notes that accompany the financial statements indicate that Jackson has not paid dividends for the two years prior to 2014. On July 1, 2014, Jackson declares a dividend of $100,000 to be paid to preferred and common stockholders on August 1.

 

Required

 

1.        Determine the amounts of the dividends to be allocated to preferred and common stock- holders assuming that the preferred stock is noncumulative, nonparticipating stock.

 

2.        Record the appropriate journal entries on July 1 and August 1, 2014.

3.        Determine the amounts of the dividends to be allocated to preferred and common stock- holders assuming instead that the preferred stock is cumulative, nonparticipating stock