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the annual report for sneer corporation disclosed that the company declared and paid preferred dividends in the amount of $220,000 in the current year. it also declared and paid dividends on common stock in the amount of $1.80 per share. during the current year, sneer had 1 million common shares authorized; 420,000 shares had been issued; and 208,000 shares were in treasury stock. the opening balance in retained earnings was $780,000 and net income for the current year was $280,000. required: prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock. using the information given above, prepare a statement of retained earnings for the year ended december 31. prepare a journal entry to close the dividends account.

Sagot :

Dividends are payments a business gives to its stockholders as a means of sharing earnings. Because they are paid on a regular basis, they are one among the ways investors make money from stock investments.

Calculation:

No. Account and explanation                 debit            credit

a Cash dividend                                  220000  

    Preferred Dividend payable                                   220000

(To record dividend declared)  

b Preferred dividend payable                220000  

      Cash                                                                   220000

(To record dividend paid)  

C Cash dividend (420000-208000)*1.8 381600  

      Common Dividend payable                                    381600

(To record dividend declared)  

d Common Dividend payable                  381600  

        Cash                                                                     381600

(To record dividend paid)  

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