Weaver Corporation had the following stock issued and outstanding at January 1, Year 1:

150,000 shares of $1 par common stock.
15,000 shares of $100 par, 6 percent, noncumulative preferred stock.

On June 10, Weaver Corporation declared the annual cash dividend on its 15,000 shares of preferred stock and a $0.50 per share dividend for the common shareholders. The dividends will be paid on July 1 to the shareholders of record on June 20.

Required:

a. Determine the total amount of dividends to be paid to the preferred shareholders and common shareholders.
b. Prepare general journal entries to record the declaration and payment of the cash dividends (be sure to date your entries).

Answer and Explanation:

The computation and the journal entries are shown below:

a. The total amount of dividend distributed to each shareholders are given below:

For Preferred shareholder, it is

= 15,000 × $100 × 6%

= $90.000

And for Common shareholder, it is

= 150,000 × $0.5

= $75000

So total dividend is

= $90,000 + $75,000

= $165,000

B)  Now the journal entries are

On  June 10

Dividend$165,000  

         To dividend payable  $165,000

(Being dividends payable is recorded)  

On  June 20

No journal entry is required

On July 1

Dividend payable$165,000  

         To To cash  $165,000

(being the dividend payment is recorded)  

On Dec 31

Retained earning$165,000  

               To dividends  $165,000

(Being dividend account is recorded)