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28 March, 18:34

The annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $180,000 in the current year. It also declared and paid dividends on common stock in the amount of $2.80 per share. During the current year, Sneer had 1 million common shares authorized; 380,000 shares had been issued; and 172,000 shares were in treasury stock. The opening balance in Retained Earnings was $880,000 and Net Income for the current year was $380,000. Required: 1. 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.)

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  1. 28 March, 20:01
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    Answer and Explanation:

    The journal entries are shown below:

    a. For preferred stock

    Preferred dividend $180,000

    To Preferred dividend payable $180,000

    (Being the dividend declared is recorded)

    Preferred dividend payable $180,000

    To Cash $180,000

    (Being the payment is recorded)

    a. For common stock

    Common dividend $582,400

    To Common dividend payable $582,400

    (Being the dividend declared is recorded)

    Common dividend payable $582,400

    To Cash $582,400

    (Being the payment is recorded)

    The computation is shown below:

    = (380,000 shares - 172,000 shares) * $2.80

    = $582,400
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