Chapter 6
Corporations: Contributed Capital and Dividends
274
AP-12A (
5
)
On May 1, 2016, Crackle Canine Inc. declared $196,000 of dividends payable to shareholders
on June 3, 2016. There are 24,800 common shares and 14,700, $1 cumulative preferred
shares. Dividends were last paid in 2012. Write the journal entry to record the declaration and
subsequent payout of the dividends. Assume the company uses the cash dividends method
to record dividends.
Date
Account Title and Explanation
Debit
Credit
AP-13A (
5
9
)
The shareholders’ equity of Khan Corporation at January 1, 2016 was as follows.
Khan Corporation
Shareholders’ Equity
As at January 1, 2016
Share Capital
Preferred Shares, $3, non-cumulative, 200,000 authorized,
2,000 issued and outstanding
$200,000
Common Shares, unlimited authorized, 32,000 issued and outstanding 1,200,000
Total Share Capital
1,400,000
Retained Earnings
320,000
Total Shareholders’ Equity
$1,720,000
No dividend was declared for common shareholders. However on December 15, 2016 the
directors decided to pay dividends to preferred shareholders. The dividend payment date was
December 28, 2016. Net income for the year was $180,000. The company uses the retained
earnings method to record dividends.
