Solution-How would the dividend have been allocated

How would the dividend have been allocated

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Reference no: EM133140579

Question - Old McDonald had a goat farm. MacDonald Farm Products (MFP) was created on January 1, 2019 with unlimited authorized common shares. On Jan 2, 2019, MFP issued and sold 60000 common shares for S4 each. Also on Jan 2, 2019, MFP issued and sold 8000, $2 noncumulative preferred shares for 510 each. MFP issued and sold another 10000 common shares on Sept 1, 2019 for $5 each. Profit for 2019 was zero; the company broke even and decided it would not be prudent to declare dividends.

2020 was a much better year. Year-end (December 31) showed $100000 profit (the profit is currently in "income summary*, so include the closing entry in your answer). On Dec 31, 2020, MFP declared a $60000 cash dividend payable on January 31, 2021 to shareholders of record on January 20

Required -

a) Prepare all necessary journal entries for the above transactions, from Jan 2, 2019 to Jan 31, 2021.

b) How would the dividend have been allocated if the preferred shares were cumulative instead of noncumulative?

Reference no: EM133140579

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How would the dividend have been allocated

Reference no: EM133140579

Reference no: EM133140579

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