Identifying and Analyzing Financial Statement Effects of Cash Dividends Freid Corp. has outstanding 6,000 shares of $50 par value, 6% preferred stock, and 40,000 shares of $1 par value common stock. The company has $328,000 of retained earnings. At year-end, the company declares and pays the regular $3 per share cash dividend on preferred stock and a $2.20 per share cash dividend on common stock. a. Using the financial statement effects template, illustrate the effects of these two dividend payments.

Retained earnings is an equity account and any cash dividends paid either to preferred or common stock will decrease cash and retained earnings, remember that both sides must balance.

anthougo anthougo · Answer 2 · 2021-12-12T18:29:52+01:00

Using the financial statement effects template, the effects of the two dividend payments by Freid Corp. are as follows:

Balance Sheet Retained Earnings Cash Flow Statement

Assets = Liab. + Equity

a. ($18,000) = Liab. + ($18,000) ($18,000) ($18,000) FA

b. ($88,000) = Liab. + ($88,000) ($88,000) ($88,000) FA

Data Analysis:

Outstanding shares:

6,000 shares of $50 par value, 6% preferred stock $300,000

40,000 shares of $1 par value, common Stock $40,000

Retained earnings = $328,000

Preferred Stock Dividends = $18,000 ($3 x 6,000)

Common Stock Dividends = $88,000 ($2.20 x 40,000)

Cash = $106,000 ($18,000 + $88,000)

Thus, the effects of the two dividend payments are reductions in the Assets, Equity, and Retained Earnings. They are also cash outflows under the financing section of the Statement of Cash Flows.

Learn more: https://brainly.com/question/16362041