Accentrics Limited has the following information available regarding its share capital at December 31,2023 : Preferred shares, $$ \$ 3.50 $$ cumulative, 20,000 shares issued $$ \$ 1,000,000 $$ Preferred shares, $$ \$ 4.50 $$ noncumulative, 10,000 shares issued $$ \$ 500,000 $$ Common shares, 300,000 shares issued The shares were issued when the corporation began operations on January 1,2022 . No dividends were declared during 2022 and 2023. On October 27,2024 , the board of directors declared the required preferred share dividends and a $$ \$ 0.50 $$ dividend for each of the common shares. The dividends are payable on December 1,2024 , to the shareholders of record on November 16,2024 . Instructions a. How much will be paid to each class of shares? b. Prepare journal entries on the appropriate dates for the 2024 dividends.

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$$
\textbf{Step 1. Calculate Preferred Dividends}
$$

$$
\textbf{a. Cumulative Preferred Shares – \$3.50 rate}
$$

The cumulative preferred shares are entitled to dividends for every year since the shares were issued. The shares were issued on January 1, 2022, and no dividends were declared in 2022 and 2023. In 2024 the board declares dividends that must include both the current year’s dividend and the unpaid dividends for 2022 and 2023.

$$
\text{Number of years in arrears + current year} = 3 \text{ years}
$$
$$
\text{Dividend per share} = \$3.50 \times 3 = \$10.50
$$
$$
\text{Total for 20,000 shares} = 20{,}000 \times \$10.50 = \$210{,}000
$$

$$
\textbf{b. Noncumulative Preferred Shares – \$4.50 rate}
$$

Noncumulative preferred shares do not accumulate dividends for prior periods. They are entitled only to the current year’s dividend provided that dividends are declared.

$$
\text{Total for 10,000 shares} = 10{,}000 \times \$4.50 = \$45{,}000
$$

$$
\textbf{Step 2. Calculate Common Share Dividends}
$$

The board declares a dividend of \$0.50 per common share. With 300,000 common shares:

$$
\text{Total common dividends} = 300{,}000 \times \$0.50 = \$150{,}000
$$

$$
\textbf{Step 3. Summary of Payments to Each Class}
$$

$$
\begin{array}{rl}
\text{Cumulative Preferred Shares:} & \$210{,}000 \
\text{Noncumulative Preferred Shares:} & \$45{,}000 \
\text{Common Shares:} & \$150{,}000 \
\hline
\text{Total Dividends:} & \$210{,}000 + \$45{,}000 + \$150{,}000 = \$405{,}000 \
\end{array}
$$

$$
\textbf{Step 4. Journal Entries}
$$

$$
\textbf{1. Date of Declaration – October 27, 2024}
$$

At the time the dividend is declared, the corporation records the liability for the total dividends:

$$
\begin{array}{rcl}
\text{Debit: Dividends (or Retained Earnings)} & \$405{,}000 & \text{(to reduce retained earnings)} \
\text{Credit: Dividends Payable} & \$405{,}000 & \text{(to record the liability)} \
\end{array}
$$

$$
\textbf{2. Date of Record – November 16, 2024}
$$

No journal entry is required on the record date.

$$
\textbf{3. Date of Payment – December 1, 2024}
$$

When the dividends are paid, the liability is removed:

$$
\begin{array}{rcl}
\text{Debit: Dividends Payable} & \$405{,}000 & \text{(to remove the liability)} \
\text{Credit: Cash} & \$405{,}000 & \text{(to record the payment)} \
\end{array}
$$

$$
\textbf{Final Answer:}
$$
- Cumulative Preferred: \$210,000  
- Noncumulative Preferred: \$45,000  
- Common Shares: \$150,000

Journal Entries:
1. On October 27, 2024:
$$
\begin{array}{lcl}
\text{Debit: Dividends (Retained Earnings)} & \$405{,}000 & \
\text{Credit: Dividends Payable} & \$405{,}000 & \
\end{array}
$$

2. On December 1, 2024:
$$
\begin{array}{lcl}
\text{Debit: Dividends Payable} & \$405{,}000 & \
\text{Credit: Cash} & \$405{,}000 & \
\end{array}
$$
**Dividends to Each Class:** - **Cumulative Preferred Shares:** \$210,000 - **Noncumulative Preferred Shares:** \$45,000 - **Common Shares:** \$150,000 **Journal Entries:** 1. **October 27, 2024 (Declaration Date):** $$ \text{Debit: Dividends (Retained Earnings)} \quad \$405{,}000 \ \text{Credit: Dividends Payable} \quad \$405{,}000 $$ 2. **December 1, 2024 (Payment Date):** $$ \text{Debit: Dividends Payable} \quad \$405{,}000 \ \text{Credit: Cash} \quad \$405{,}000 $$

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