Computing and Journalizing Dividends for Preferred and Common Stock

This paper covers the process of computing and journalizing dividends for both preferred and common stock in financial accounting.

Daniel Kim

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Computing and Journalizing Dividends for Preferred and Common StockP12-32AComputing dividends on preferred and common stock [15–20min]Fashonista Skincare has 10,000 shares of 3%, $20 par value preferred stock and90,000 shares of $2 par common stock outstanding. During a three-year period,Fashionista declared and paid cash dividends as follows: 2010, $3,000; 2011,$13,000; and 2012, $17,000.Requirements1.Compute the total dividends to preferred and to common for each of thethree years ifa.preferred is noncumulative.b.preferred is cumulative.2.For requirement 1.b., journalize the declaration of the 2012 dividends onDecember 22, 2012, and payment on January 14, 2013. Use separate Dividendspayable accounts for preferred and common.(15-20 min.)P 12-32AReq. 1a.Noncummulative:2010 dividend of $3,000:Preferred dividend*$3,000Common dividend0Total dividend$3,000*10,000 x $20 par x 3% = $6,000

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