Before preparing financial statements for the current year, the chief accountant for Patel Ltd. provided the following information regarding the accounting for dividends and stock splits: 

1. Patel has 20,000, $4 noncumulative preferred shares issued. It paid the preferred shareholders the quarterly dividend, and recorded it as a debit to Dividends Expense and a credit to Cash. 

2. A 5% stock dividend (1,000 shares) was declared on the common shares when the fair value per share was $12. To record the declaration, Retained Earnings was debited and Dividends Payable was credited. The shares have not been issued yet. 

3. The company declared a 2-for-1 stock split on its 20,000, $4 noncumulative preferred shares. The average per share amount of the preferred shares before the split was $70. The split was recorded as a debit to Retained Earnings of $1.4 million and a credit to Preferred Shares of $1.4 million. 

Instructions 

Determine if each of the above transactions was recorded correctly and, if not, prepare the correct entry.