Knudsen Corporation was organized on January 1, 2019. during its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2019, $5,000; 2020, $12,000; and 2021, $28,000.

Instructions

1. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 6% and noncumulative.
2. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 7% and noncumulative.
3. Journalize the declaration of the cash dividend at December 31, 2021, under part (b).

Solution