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Cash Dividends on Common and Preferred Stock
Lemon Inc. has the following information regarding its preferred and common stock:
Preferred stock, S30 par, 12% cumulative; 300,000 shares authorized; 150,000 shares issued and outstanding
Common stock, $2 par; 2,500,000 shares authorized; 1,200,000 shares issued; 1,000,000 outstanding
As of December 31, 2019, Lemon was 3 years in arrears on its dividends. During 2020, Lemon declared and paid dividends. As a result, the common stockholders received dividends of $0.45 per share.
- What was the total amount of dividends declared and paid?
- What journal entry was made at the date of declaration?
Concept introduction:
Cash dividend:
The Cash dividend is the amount of dividend paid to shareholders in cash. The Cash dividend is declared first and paid later. There are two journal entries made, one at the time of declaration of dividend and another at the time of payment.
Requirement 1:
To calculate:
The total amount of dividend declared and paid.
The total amount of dividend declared and paid is calculated as follows:
| Preferred Dividend | Common Dividend | Total | Preferred Dividend in Arrears | |
| Year 2019 | $... |
Concept introduction:
Cash dividend:
The Cash dividend is the amount of dividend paid to shareholders in cash. The Cash dividend is declared first and paid later. There are two journal entries made, one at the time of declaration of dividend and another at the time of payment.
Requirement 2:
To prepare:
The Journal entry made at the time of declaration.
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