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Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 390 shares of preferred stock and 4,900 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:
| March | 1 | Issue 2,000 shares of common stock for $51 per share. | ||
| May | 15 | Purchase 490 shares of treasury stock for $44 per share. | ||
| July | 10 | Resell 290 shares of treasury stock purchased on May 15 for $49 per share. | ||
| October | 15 | Issue 290 shares of preferred stock for $54 per share. | ||
| December | 1 | Declare a cash dividend on both common and preferred stock of $1.40 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.) | ||
| December | 31 | Pay the cash dividends declared on December 1. |
Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $390; Common Stock, $49; Additional Paid-in Capital, $80,500; and Retained Earnings, $32,300. Net income for the year ended December 31, 2021, is $12,600.
Question :
a. Record the declaration of a cash dividend on both common and preferred stock of $1.40 per share to all stockholders. (Hint: Dividends are not paid on treasury stock.)
b. Record the cash dividends declared on December 1.
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