PROBLEM 3

Timber Ridge Corporation was organized on January 1, 2013. During its first year, the corporation issued 40,000 shares of $5 par value preferred stock and 400,000 shares of $1 par value common stock. At December 31, the company declared the following cash dividends:

2013 $ 8,000

2014 $30,000

2015 $70,000

Instructions

(a) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 5% and not cumulative.

(b) Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 6% and cumulative.

(c) Journalize the declaration of the cash dividend at December 31, 2015 using the assumption of part (b).

(a) Preferred Common Total

2013

2014

2015

(b) Preferred Common Total

2013

2014

2015

(c)

Date	Account	Debit	Credit