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A. Dividends Review Problem Red Corporations December 31, 2015 Shareholders' Equity consists of the following:

$200,000 of $1 par common stock

$400,000 of $40 par value, 6% cumulative, nonparticipating preferred stock

$3,000,000 of retained earnings

Reds board of directors declared cash dividends of $40,000 in 2016, $20,000 in 2017, and $50,000 in 2018.

1.) What amount of dividends will be paid to common and preferred shareholders each year?

Preferred Common

2016:

2017:

2018:

2.) What is the amount of dividends per share that will be paid to common and preferred shareholders each year? (Hint: Youll need to calculate the number of shares issued and outstanding you can assume there is no treasury stock.)

Preferred Common

2016:

2017:

2018:

3.) What is the ending balance in Retained Earnings at December 31, 2018, assuming that Red reports Net Income of $500,000 per year for 2016, 2017 and 2018?

B. Retirement of Stock Review Problem(FYI, this question is similar to Part B of the In-Class Exercise at the end of your Ch. 18 notes, except I changed it to a retirement of stock, rather than a purchase of treasury stock).

During 2018 (the first year in which the Company was in business), the Nicklaus Corporation participated in three equity transactions:

1. On January 2, 2018, 3 million shares of $1 par value common stock are issued for $10 per share.

2. On June 30, 2018, the corporation reacquires and retires 200,000 shares of its common stock at a price of $12 per share.

3. On July 31, 2018, 50,000 shares of common stock are issued at $15 per share.

Required:

1. Prepare journal entries to record these transactions.

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