On December 10, HoHo Limited declared the annual cash dividend on its 5,000 $3.00 preferred shares and a $0.60 per share cash dividend on its 50,000 common shares.

HoHo Limited then paid the dividends on January 8, 2020. HoHo Limited earned net income of $85,000 during the year ended December 31, 2019, and has sufficient cash to pay the dividends.

1. Journalize the declaration of the cash dividends on December 10, 2019.

2. Journalize the payment of the cash dividends on January 8, 2020.

Xiong Inc. has the following shareholders’ equity:

Preferred shares, $0.025, cumulative,
liquidation value $0.50, 50,000 shares authorized,
45,000 shares issued and outstanding $ ............................................. 20,000
Common shares, 1,000,000 shares authorized and issued
and outstanding ................................................................................... 200,000
Retained earnings ................................................................................ 130,000
Total shareholders’ equity ................................................................. $350,000

Answer these questions about Xiong’s dividends:

1. Are Xiong Inc.’s preferred shares cumulative or noncumulative? How can you tell? Assume there are no dividends in arrears.

2. Suppose Xiong Inc. declares cash dividends of $17,000 for 2020. How much of the dividends goes to preferred shares? How much goes to common shares? Assume that there are no dividends in arrears.

3. Suppose Xiong Inc. did not pay the preferred dividend in 2018 and 2019. In 2020, the company declares cash dividends of $17,000. How much of the dividends goes to preferred shares? How much goes to common shares?