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Homework answers / question archive / The books of Crane Corporation carried the following account balances as of December 31, 2020
The books of Crane Corporation carried the following account balances as of December 31, 2020.
Cash $ 205,000
Preferred Stock (6% cumulative, nonparticipating, $50 par) 302,000
Common Stock (no-par value, 272,000 shares issued) 1,360,000
Paid-in Capital in Excess of Par—Preferred Stock 159,000
Treasury Stock (common 2,900 shares at cost) 31,900
Retained Earnings 100,600
The company decided not to pay any dividends in 2020.
The board of directors, at their annual meeting on December 21, 2021, declared the following: "The current year dividends shall be 6% on the preferred and $0.40 per share on the common. The dividends in arrears shall be paid by issuing 1,510 shares of treasury stock." At the date of declaration, the preferred is selling at $77 per share, and the common at $12 per share. Net income for 2021 is estimated at $75,600.
(a) Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 3,487.)
(b) Could Crane Corporation give the preferred stockholders 2 years' dividends and common stockholders a 40 cents per share dividend, all in cash?
a). Please see the attachment:
b). Total dividends are $18,120 + $18,120 + $108,244 = $144,484, while the available cash balance is $205,000. Hence, Crane could give the entire dividends in cash.
