Question

Question 15 Crane Corporation was organized on January 1, 2017. During its first year, the corporation issued 2,050 shares of $50 par value preferred stock and 106,000 shares of $10 par va December 31, the company declared the following cash dividends: 2019, $5,975; 2020, 614,400; and 2021, $27.500. Show the allocation of dividends to each class of stock, assuming the preferred 2019 2020 Allocation to preferred stock Allocation to common stock Show the allocation of dividends to each class of stock, assuming the preferr Allocation to preferred stocks Allocation to common stock Journalize the declaration of the cash dividend at December 31, 2021, under part (b). (Credit ac entry is required, select "No Entry for the accountities and enter for the amounts.) not indent manually. If no Date Account Titles and Explanation Dec. 31

Answer 1

Part a

The previous period's unpaid dividend will not be paid if the preference share is noncumulative.
Annual preferred dividend (2050*50*7%)			$          7,175
For year 2019, the total dividend paid is $5,975, which is less than the annual preferred dividend. Therefore, $5,975 is paid to preferred stock.
For year 2020 and 2021, the preferred dividend paid is $7,175 and the remaining amount out of total dividends paid to common stockholders.
Year	Total dividends	Less: Preferred dividends	Common dividends
2019	$        5,975	$    5,975	$                 -
2020	$     14,400	$    7,175	$          7,225
2021	$     27,500	$    7,175	$        20,325
Year	2019	2020	2021
Allocated to preferred stock	$        5,975	$    7,175	$          7,175
Allocated to common stock	$               -	$    7,225	$        20,325

Part b

The previous period's unpaid dividend will be paid if the preference share is cumulative.
Annual preferred dividend (2050*50*9%)			$          9,225
For year 2019, the total dividend paid is $5,975, which is less than the annual preferred dividend of $9,225. Therefore, $5,975 is paid to preferred stock and remaining $3,250 consider as unpaid dividends, which will be paid in the future year.
For year 2020 , the preferred dividend paid = (9225+3250) =			$        12,475
For year 2021, the preferred dividend paid is $9,225 and the remaining amount out of total dividends paid to common stockholders.
Year	Total dividends	Less: Preferred dividends	Common dividends
2019	$        5,975	$    5,975	$                 -
2020	$     14,400	$ 12,475	$          1,925
2021	$     27,500	$    9,225	$        18,275
Year	2019	2020	2021
Allocated to preferred stock	$        5,975	$ 12,475	$          9,225
Allocated to common stock	$               -	$    1,925	$        18,275

Part c

Date	Account title	Debit	Credit
Dec 31, 2021	Cash dividends	$ 27,500
	Preferred dividends payable		$          9,225
	Common dividends payable		$        18,275
	To record the dividend declared to preferred stock and common stock.