Cash Dividends

The Stockholders' Equity section of Jackson Company's balance sheet as of January 1, 2017, appeared as follows:

Preferred stock, $100 par, 8%, 2,000 shares issued and outstanding$200,000Common stock, $10 par, 5,000 shares issued and outstanding50,000Additional paid-in capital300,000Total contributed capital$550,000Retained earnings400,000Total stockholders' equity$950,000

The notes that accompany the financial statements indicate that Jackson has not paid dividends for the two years prior to 2017. On July 1, 2017, 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.

Amount of DividendsPreferred stock$Common stock$

2.Identify and analyze the effect of the transactions on July 1 and August 1, 2017.

July 1:

Activity

Accounts

Statement(s)