Cash Dividends The Stockholders’ Equity category of Jackson Company’s balance sheet as of January 1, 2010, appeared as follows:

Preferred stock, $100 par, 8%, 2,000 shares issued and outstanding $200,000 Common stock, $10 par, 5,000 shares issued and outstanding 50,000 Additional paid-in capital 300,000 Total contributed capital $550,000 Retained earnings 400,000 Total stockholders’ equity $950,000 The notes that accompany the fi nancial statements indicate that Jackson has not paid dividends for the two years prior to 2010. On July 1, 2010, Jackson declares a dividend of $100,000 to be paid to preferred and common stockholders on August 1.

Required 1. Determine the amounts of the dividends to be allocated to preferred and common stockholders assuming that the preferred stock is noncumulative, nonparticipating stock.

2. Identify and analyze the effect of the transactions on July 1 and August 1, 2010.

3. Determine the amounts of the dividends to be allocated to preferred and common stockholders assuming instead that the preferred stock is cumulative, nonparticipating stock.

AppendixLO1