Problem - Martinez Corporation has 12.20 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 81 cents per share cash dividend to stockholders of record as of June 14, payable June 30.

Required -

Prepare the journal entries for each of the dates above assuming the dividend represents a distribution of earnings.

How would the entries differ if the dividend were a liquidating dividend?

The outstanding capital stock of Tamarisk Corporation consists of 1,800 shares of $100 par value, 7% preferred, and 5,500 shares of $50 par value common.

Assuming that the company has retained earnings of $91,500, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions.

(a) The preferred stock is noncumulative and nonparticipating.

(b) The preferred stock is cumulative and nonparticipating.

(c) The preferred stock is cumulative and participating.