Preparing the Stockholders' Equity Section and Recording Dividends
Response to the following problem:
In 2007, Lee Ann Adams and some college friends organized The Candy Jar, a gourmet candy company. In 2007, The Candy Jar issued 150,000 of the 300,000 authorized shares of common stock, par value $15, for $3,000,000 and all the 50,000 authorized shares of 10%, $20 par, cumulative preferred stock for $1,100,000. Combined earnings for 2007, 2008, 2009, and 2010 amounted to $1,250,000. Dividends paid in the four years were as follows: 2007-$100,000; 2008-$300,000; 2009-$0; 2010-$150,000.
Required:
1. Prepare the stockholders' equity section of the balance sheet as of December 31, 2010, for The Candy Jar.
2. Prepare the journal entry that would be necessary to record the dividends paid in 2010.