P15-7 (LO3) (Cash Dividend Entries) The books of ConchitaCorporation carried the following account balances as of December31, 2017. Cash $ 195,000 Preferred Stock (6% cumulative,nonparticipating, $50 par) 300,000 Common Stock (no-par value,300,000 shares issued) 1,500,000 Paid-in Capital in Excess ofPar—Preferred Stock 150,000 Treasury Stock (common 2,800 shares atcost) 33,600 Retained Earnings 105,000 The company decided not topay any dividends in 2017. The board of directors, at their annualmeeting on December 21, 2018, declared the following: “The currentyear dividends shall be 6% on the preferred and $.30 per share onthe common. The dividends in arrears shall be paid by issuing 1,500shares of treasury stock.†At the date of declaration, thepreferred is selling at $80 per share, and the common at $12 pershare. Net income for 2018 is estimated at $77,000. Instructions(a) Prepare the journal entries required for the dividenddeclaration and payment, assuming that they occur simultaneously.(b) Could Conchita Corporation give the preferred stockholders 2years’ dividends and common stockholders a 30 cents per sharedividend, all in cash?
