Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 48

Recording the Payment of Dividends and Preparing a Statement of Retained Earnings
The 2012 annual report for Sneer Corporation disclosed that the company declared and paid preferred dividends in the amount of $100,000 in 2012. It also declared and paid dividends on common stock in the amount of $2 per share. During 2012, Sneer had 1 million common shares authorized; 300,000 shares had been issued; and 100,000 shares were in treasury stock. The balance in Retained Earning; was $800,000 on December 31, 2011, and 2012 Net Income was $300,000.
Required:
1. Prepare journal entries to record the declaration, and payment, of dividends on ( a ) preferred and ( b ) common stock.
2. Using the information given above, prepare a statement of retained earnings for the year ended December 31, 2013.