The books of Conchita Corporation carried the following account balances as of December 31, 2020.

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 of Par—Preferred Stock....................................150,000
Treasury Stock (common 2,800 shares at cost)..........................................33,600
Retained Earnings.........................................................................................105,000

The company decided not to pay any dividends in 2020.

The board of directors, at their annual meeting on December 21, 2021, declared the following: “The current year dividends shall be 6% on the preferred and $.30 per share on the common. The dividends in arrears shall be paid by issuing 1,500 shares of treasury stock.” At the date of declaration, the preferred is selling at $80 per share, and the common at $12 per share. Net income for 2021 is estimated at $77,000.

Instructions

a. Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously.

b. Could Conchita Corporation give the preferred stockholders 2 years’ dividends and common stockholders a 30 cents per share dividend, all in cash?