Reference no: EM132351172

Question - Baur Company has 21,000 shares of $10 par value, 8% preferred stock and 500,000 shares of $1 par value common stock outstanding. As of December 31, 2018, it had $900,000 of Retained earnings.

On December 31, 2018, the Board of Directors is considering the distribution of a cash dividend to the common and preferred stockholders. No dividends were declared in 2016 and 2017 and no dividends were in arrears prior to 2016. The company is considering the following options.

Option 1 - The preferred stock is noncumulative and the dividend for 2018 would be $30,000.

Option 2 - The preferred stock is cumulative and the dividends would be $30,000.

Option 3 - The preferred stock is cumulative and the dividends would be $75,000.

Required -

1. For each scenario, determine the dollar amount of dividends that would be paid to each class of stockholder.

2. Define the following as they pertain to dividend distribution:

a. Date of declaration

b. Date of record

c. Date of payment

3. On which of these dates (date of declaration, date of record or date of payment) would a company NOT make a journal entry?