Reference no: EM132589968

Jupp Jellies runs a large operation on Saturn under a separate corporate entity, Titanic, Inc., and an independent local management team. However, all strategic decisions are made by the home company. Titan had reported a net income of $1,700,000 for 2018, a capital structure of 225,000 common shares with a contributed capital of $5,500,000; and 200,000 cumulative preferred shares with a contributed capital of $2,000,000. Preferred shareholders would receive a minimum dividend of $2.20 but held participative rights in the distribution of excess dividends. The last dividends declared by Titanic were in 2014.

• In view of the excellent earnings for the past three years, the Titan management decided to declare a dividend for 2018. It decided that the common shareholders would be entitled to a dividend of $9.00 per share and the preferred shareholders could participate in the excess based on the dividends to common shareholders exceeding $5.80 per share.
• You took a quick glance at the information submitted and agreed to his proposal. He drew a long sigh of relief. "I am so glad you saved my job. Lunch is on me," he stated gratefully. Following a most sumptuous meal of space burgers, a Martian red salad and a jelly shake, you settle down to resolving the questions contained in his list below.

Required:

Question 1: You were asked to prepare a well formatted schedule showing the following:

a. The total amount of dividends which the management would declare; and

b. The total amounts payable to each group of shareholders.

c. The appropriate journal entry made upon the declaration of the dividend.