Question

The books of Crane Corporation carried the following account balances as of December 31, 2017.

Cash		$ 206,000
Preferred Stock (6% cumulative, nonparticipating, $50 par)		282,000
Common Stock (no-par value, 328,000 shares issued)		1,640,000
Paid-in Capital in Excess of Par—Preferred Stock		141,000
Treasury Stock (common 2,900 shares at cost)		30,800
Retained Earnings		108,400

The company decided not to pay any dividends in 2017.

The board of directors, at their annual meeting on December 21, 2018, declared the following: “The current year dividends shall be 6% on the preferred and $0.50 per share on the common. The dividends in arrears shall be paid by issuing 1,410 shares of treasury stock.” At the date of declaration, the preferred is selling at $74 per share, and the common at $12 per share. Net income for 2018 is estimated at $77,300.

(a) Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 3,487.)

(b) Could Crane Corporation give the preferred stockholders 2 years’ dividends and common stockholders a 50 cents per share dividend, all in cash?

Answer 1

A) Ans: Date	Accounts Title And Explanation	Debit	Credit
Dec 21th ,2018	Retained Earnings(282,000*6%+328,000*0.50	$180,920
	Preferred Dividend Payable		$16,920
	Common Stock Dividend Payable		$164000
	(To Record the dividend payable on common stock and Preferred stock)
Jan-19	Preferred Dividend Payable	$16,920
	Common Stock Dividend Payable	$164000
	Cash		$164000
	Treasury Stock($12*1410)		$16,920
	(To record the Payment of Dividend and Issue of Treasury stock in lieu of Cash Dividend

B) Ans:

Yes The company Can able to pay the 2 years Preferred dividend and 0.50 cents per common stock as the retained earnings and cash are available to Pay

Particulars	Amount
Common Dividend
(0.5$*328,000)	1,64,000
Preferred Dividend Payable
282k*6%*2	33,840
Total Dividend Payable	1,97,840