The Stockholders’ Equity category of Jackson Company’s balance sheet as of January 1, 2017, appeared as follows:
The notes that accompany the financial statements indicate that Jackson has not paid dividends for the two years prior to 2017. On July 1, 2017, Jackson declares a dividend of $100,000 to be paid to preferred and common stockholders on August 1.
1. Determine the amounts of the dividends to be allocated to preferred and common stock-holders assuming that the preferred stock is noncumulative, nonparticipating stock.
2. Identify and analyze the effect of the transactions on July 1 and August 1, 2017.
3. Determine the amounts of the dividends to be allocated to preferred and common stock-holders assuming instead that the preferred stock is cumulative, nonparticipating stock