a. Explanation Preferred Stock : Preferred stock is a type of stockholder’s capital which has a special right as compared to equity, like fixed dividend and preferential treatment at the event of liquidation and payment of dividend. Journalizing: Journalizing is the process of recording the transactions of an organization in a chronological order. Based on these journal entries recorded, the accounts are posted to the relevant ledger accounts. Accounting rules for journal entries: To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains. To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains. Declared a preference cash dividend payable: Date Account Title and Explanation Post ref Debit ($) Credit ($) Dividend-preferred 416,000 Dividend payable-preferred 416,000 (Being dividend is declared and it became a liability ) Table (1) Dividend is a part of equity. Since, dividend is being paid, it reduced equity. Hence debit dividend account. Dividend payable is a liability. Since, dividend is an expense but not paid yet, it increases liability. Hence, credit dividend payable account. Working note: Calculation of amount of preferred dividend, Dividend = Shares outstanding × Rate of dividend = $ 5 , 200 , 000 × 8 % = $ 416 , 000 Declared a common stock cash dividend payable: Date Account Title and Explanation Post ref Debit ($) Credit ($) Dividend 464,000 Dividend payable-common stock 464,000 (Being dividend is declared and it became a liability ) Table (2) Dividend is a part of equity. Since, dividend is being paid, it reduced equity b. To determine To prepare: The statement of shareholders equity at the end of the year.

3rd Edition

ISBN: 9780136946694

Author: GORDON

Publisher: RENT PEARS

See similar textbooks

Concept explainers

Stockholder's Equity

The stockholders’ equity (often referred to as the book value of the company) is the number of assets available to the stockholder after its entire liabilities is paid off. The stockholders’ equity is also sometimes referred to as owner's equity. The sto…

Videos

Question

Chapter 15, Problem 15.16E

To determine

To prepare: Journal entry.

To determine

To prepare: The statement of shareholders equity at the end of the year.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 15, Problem 15.15E

Chapter 15, Problem 15.17E

Students have asked these similar questions

Ute Company reported the following capital structure during the current year: 5% cumulative preference share capital, par value P100, 25,000 shares issued and outstanding Ordinary Share capital, par value P35, 100,000 shares issued and outstanding The entity reported net income of P5,000,000 for the current year. The entity paid P125,000 in preference dividends in the current year. 7. What amount should be reported as the basic earnings per share? a. 48.75 b. 50.00 c. 51.25 2,500,000 3,500,000

Foley Corporation has the following capital structure at the beginning of the year: 6% Preferred stock, $50 par value, cumulative and participating, 20,000 shares authorized, 6,720 shares issued and outstanding $ 336,000 Common stock, $10 par value, 600,000 shares authorized, 50,400 shares issued and outstanding 504,000 Paid-in capital in excess of par 110,000 Total paid-in capital 950,000 Retained earnings 440,000 Total stockholders' equity $1,390,000 Instructions (a) Record the following transactions which occurred consecutively (show all calculations). 2/1: 3,000 common stock shares were repurchased for $12 each; 4/15: $165,000 cash dividend was declared and paid to preferred and common stockholders; (Note: dividends are 3-years in arrears) 7/31: 8,500 new shares of common stock were sold to investors for $14 each. 10/31: 13% stock dividend was declared and paid on common stock when the current selling price of the stock was $18 per share. (b) Assume that net income for the…

Foley Corporation has the following capital structure at the beginning of the year. 5% Preferred stock, $50 par value, 20,000 shares authorized, 6,000 shares issued and outstanding Common stock, $10 par value, 60,000 shares authorized, 40,000 shares issued and outstanding Paid-in capital in excess of par Total paid in capital Retained earnings Total stockholders' equity $ 300,000 400,000 110.000 810,000 440,000 $1,250,000 Instructions (a) Record the following transactions which occurred consecutively (show all calculations). 1. A total cash dividend of $90,000 was declared and payable to stockholders of record. Record dividends payable on common and preferred stock in separate accounts. 2. A 15% common stock dividend was declared. The average fair value of the common stock is $25 a share. 3. Assume that net income for the year was $160,000 (record the closing entry) and the board of directors appropriated $70,000 of retained earnings for plant expansion. (b) Construct the stockholders'…

Chapter 15 Solutions

INTERMEDIATE ACCOUNTING

Ch. 15 - Prob. 15.1Q Ch. 15 - What are the retained earnings of a firm?Ch. 15 - Prob. 15.3Q Ch. 15 - Prob. 15.4Q Ch. 15 - Does an entity have to legally dissolve treasury...Ch. 15 - Prob. 15.6Q Ch. 15 - Prob. 15.7Q Ch. 15 - Prob. 15.8Q Ch. 15 - Prob. 15.9Q Ch. 15 - Prob. 15.10Q

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Journal entry .

Solution Summary: The author describes journalizing as the process of recording the transactions of an organization in a chronological order.