Part A Journal entries

CED Corporation reported stockholders' equity on December 31, 2021 as follows:

Common stock, $5 par value, 1,000,000 shares authorized, 300,000 shares issued $1,500,000

Additional paid-in capital, common stock 500,000

Retained earnings 2,000,000

The following selected transactions occurred during 2021:

Feb. 14 The board of directors declared a 5% stock dividend to stockholders of record on March 1, payable

March 14. The stock was selling for $9 per share on March 1. Mar. 14 Paid the stock dividend. June 1 A cash dividend of $0.20 per share was declared by the board of directors to stockholders of record on June 20, payable June 30.

June 30 Paid the cash dividend.

Dec.1 Borrowed $45,000 cash from a local bank with a 60-day, 9% note payable

Dec.31 Record the accrued interest expense.

During 2021, CED Corporation earned net income of $900,000.

Required:

1. Prepare the journal entries to record the above transactions. (10 marks)

2. What is the amount of retained earnings as of December 31, 2021? (4 marks)

Part B Allocation of Dividend (3 marks)

A corporation has the following stocks outstanding when the company's board of directors declared a $95,000 cash dividend during the current year:

Preferred stock, $50 par, 8%, 5,000 shares issued, cumulative $ 250,000

Common stock, $10 par, 50,000 shares issued 500,000

Total $750,000

Required:

Allocate the cash dividend between the preferred and common stockholders assuming the preferred stock dividends are one year in arrears.