The Shareholders' Equity Section of Winters Company Contained the Following

question 66

Multiple Choice

The shareholders' equity section of Winters Company contained the following balances as of December 31, 2017:
$\begin{array}{|l|r|}\hline \text { Preferred stock ( } 10 \%, \$ 15 \text { par value, cumulative) } & \$ 1,500 \\\hline \text { Preferred stock ( } 12 \%, \$ 10 \text { par value, noncumulative) } & 1,500 \\\hline \text { Common stock } \$ 1 \text { par value, } 5,000 \text { shares authorized, } & 3,500 \\3,500 \text { issued and } 400 \text { held in treasury) } &\\\hline \text { Additional paid-in capital: } & \\\hline \text { Preferred stock (10\%) } & 1,050 \\\hline \text { Preferred stock }(12 \%) & 1,275 \\\hline \text { Common stock } & 2,345 \\\hline \text { Retained earnings } & 4,256 \\\hline \text { Less: Treasury stock } & \underline{(5,750) } \\\hline \text { Total shareholders' equity } & \$ 9.676 \\\hline\end{array}$


On September 26, 2018, Winters issued 200 shares of its 10 percent preferred stock at $23 per share. On December 2, the company declared a cash dividend of $1,050, which was paid on December 27. Winters did not declare or pay any dividends during 2017. If Winters uses a separate dividend account for each type of stock, which of the following would be included in the journal entry to record the declaration of the 10% preferred stock dividend?

• A)a credit to 10% Preferred Cash Dividend for $600.
• B)a debit to Dividend Expense for $600.
• C)a credit to Dividends Payable for $600.
• D)a debit to Cash for $600.

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Definitions:

Gross Profit

The revenue a corporation retains after removing the costs related to the creation and sale of its products or the provision of its services.

Sales Discounts

Reductions in the amount due from a customer, offered as an incentive for early payment according to the sales terms.

Sales Returns

Transactions where customers return previously purchased merchandise, leading to a reversal of revenue.

Cost of Goods Sold

The specific costs incurred in the production of a company's sold merchandise.