Question

The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $160,000 in the current year. It also declared and paid dividends on common stock in the amount of $2.60 per share. During the current year, Sneer had 1 million common shares authorized; 360,000 shares had been issued; and 154,000 shares were in treasury stock. The opening balance in Retained Earnings was $860,000 and Net Income for the current year was $360,000.

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Prepare journal entries to record the declaration, and payment, of dividends on (a) preferred and (b) common stock. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) - Using the information given above, prepare a statement of retained earnings for the year ended December 31.

Answer 1

Date	Acount Description	Debit	Credit
a	Preference Dividend	160,000.00
	Preference Dividend payable		160,000.00
	(Being Dividend Declared)
	Preference Dividend payable	160,000.00
	Cash		160,000.00
	(Being dividend Paid)
b	Common Dividend	535,600.00
	Dividend Payable*		535,600.00
	(Being Dividend Declared)
	Dividend Payable	535,600.00
	Cash		535,600.00
	(Being Dividend paid)

Statement of Retained Earnings
Retained Earnings, Jan 1		860,000
Net Income Earned During Year		360,000
Subtotal		1,220,000
Dividend Declared during Year:
Preferred Dividend	(160,000)
Common Dividend	(535,600)	(695,600)
Treasury Stock		(154,000)
Retained Earnings, Dec 31		370,400

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