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

1. 52,000 shares of S14 par common stock.

2. 4,500 shares of $80 par, 6 percent, noncumulative preferred stock.

On June 10, Weaver Corporation declared the annual cash dividend on its 4,500 shares of preferred stock and a S4 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. (If no entry Is requlred fora transaction/event, select "No Journal entry required" In the first account field.)

1. Total dividend = $229,600

2. See explanation section

Explanation:

1.

Common stockholders' dividend = No. of common shares x dividend per share

Common stockholders' dividend = 52,000 shares x $4

Common stockholders' dividend = $208,000

Preferred dividend = (No. of preference shares x par stock price) x cost of dividend

Preferred dividend = (4,500 x $80) x 6%

Preferred dividend = $360,000 x 6%

Preferred dividend = $21,600

Total dividend = $208,000 + 21,600 = $229,600

2.

When the company declares the dividend, the journal entry to record -

Debit Retained earnings $229,600

Credit Dividends payable $229,600

As the company declares, dividend becomes liable for that company. so, it is a credit. As dividend will be deducted from retained earnings, it becomes a debit.

When the company pays the dividend, the journal entry to record -

Debit Dividend payable $229,000

Credit Cash $229,000

As the company paid the dividend, cash becomes a credit and payable becomes "0".