The Stockholders' Equity section of Jackson Company's balance sheet as of January 1, 2017,
appeared as follows:
Preferred stock, $100 par, 8%, 2,000 shares issued and outstanding$200,000Common stock, $10 par, 5,000 shares issued and outstanding50,000Additional paid-in capital300,000Total contributed capital$550,000Retained earnings400,000Total stockholders' equity$950,000
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 $100,000 to be paid to preferred and common stockholders on August 1.
1. Determine the amounts of the dividends to be allocated to preferred and common stockholders assuming that the preferred stock is noncumulative, nonparticipating stock.
Amount of DividendsPreferred stock$Common stock$
2. Identify and analyze the effect of the transactions on July 1 and August 1, 2017.