Accounting for cash dividends (Learning Objective 4) 15–20 min.

Kahluna Consulting, Inc., has 8,000 shares of $5.00, no-par preferred stock and 70,000 shares of no-par common stock outstanding for 2012–2014. Kahluna declared and paid the following dividends during a three-year period: 2012, $22,000; 2013,

$95,000; and 2014, $225,000.

Requirements 1. Compute the total dividends to preferred stockholders and to common stockholders for each of the three years if:

a. preferred is noncumulative.

b. preferred is cumulative.

2. For case 1(b), journalize the declaration of the 2014 dividends on December 28, 2014, and the payment of dividends on January 17, 2015. Use separate Dividends Payable accounts for preferred and common stock.

AppendixLO1