Question

Unit 1 Lab--Principles of Accounting II

Exercise 14-02 a-c

Pharoah Corporation was organized on January 1, 2019. During its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 103,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2019, $5,500; 2020, $13,700; and 2021, $28,500.

1. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 6% and noncumulative.

2. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 9% and cumulative.

3. Journalize the declaration of the cash dividend at December 31, 2021, under part (b)

Answer 1

1. Annual dividend on preferred stock = Number of preferred shares x par value per preferred share x Dividend rate on preferred stock

= 2,000 x 50 x 6%

= $6,000

Year	Preferred dividend	Common dividend
2019	5,500	0
2020	6,000	7,700
2021	6,000	22,500

2. Annual dividend on preferred stock = Number of preferred shares x par value per preferred share x Dividend rate on preferred stock

= 2,000 x 50 x 9%

= $9,000

Year	Preferred dividend	Common dividend	Total
2019	5,500	0	5,500
2020	12,500	1,200	13,700
2021	9,000	19,500	28,500

3. Journal

Dec 31, 2021	Retained earning	28,500
	Dividend payable-Preferred		9,000
	Dividend payable-Common		19,500

kindly give a positive rating if you are satisfied with the solution. Please ask if you have any query related to the question, Thanks.