Madison Company earned net income of $75,000 during the year ended December 31, 2016
On December 20, Madison declared the annual cash dividend on its 8% preferred stock (par value, $150,000 ) and a $0.50 per share cash dividend on its common stock (45,000 shares). Madison then paid the dividends on January 10, 2017.
Prepare the journal entries to record the declaration and the distribution of the dividends. Explanations are not required.
What will be an ideal response
Date Accounts and Explanation Debit Credit
2016 Cash Dividends ($12,000 + $22,500 ) 34,500
Dec. 20 Dividends Payable—Preferred
(8% x $150,000 ) 12,000
Dividends Payable—Common
($0.50 per share x 45,000 ) 22,500
Date Accounts and Explanation Debit Credit
2017 Dividends Payable—Preferred 12,000
Jan. 10 Dividends Payable—Common 22,500
Cash 34,500
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