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-   -   Dividends non cumulative (https://www.askmehelpdesk.com/showthread.php?t=292858)

  • Dec 16, 2008, 12:19 PM
    cat55
    dividends non cumulative
    ignemo corp had 1000 shares of $5 par value common stock and 500 shares of $100 par value 6% non cumulative preferred stock outstanding they declared and paid dividends of 7000.
    OK so you
    debit cash 7000
    credit dividends payable 7000 and then debit it 7000 once you pay it
    you debit 4000 dividends common
    and credit 3000 dividends preferred

    if that's right and correct me if I'm wrong, how do you get the 3000 and the 4000?
  • Dec 21, 2008, 02:42 PM
    pready

    When Dividends are declared the journal entry is:
    Debit Retained Earnings for 7,000
    Credit Dividends Payable for 7,000

    When the dividends are paid the journal entry is:
    Debit Dividends Payable for 7,000
    Credit Cash for 7,000

    To compute the amount of Preferred Dividend paid you take your 6% * the share price of $100 * number of shares issued and outstanding of 500.

    6% * $100 = $6 * 500 = $3,000

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