The books of Conchita SA carried the following account balances as of December 31, 2022.

Cash ................................................................................................................................... R$ 195,000
Share Capital—Preference (6% cumulative, non-participating, R$50 par) .................... 300,000
Share Capital—Ordinary (no-par value, 300,000 shares issued) ................................ 1,500,000
Share Premium—Preference ............................................................................................... 150,000
Treasury Shares (ordinary 2,800 shares at cost) ................................................................ 33,600
Retained Earnings ................................................................................................................. 105,000

The company decided not to pay any dividends in 2022.

The board of directors, at their annual meeting on December 21, 2023, declared the following: “The current year dividends shall be 6% on the preference and R$0.30 per share on the ordinary. The dividends in arrears shall be paid by issuing 1,500 treasury shares.” At the date of declaration, the preference is selling at R$80 per share, and the ordinary at R$12 per share. Net income for 2023 is estimated at R$77,000.

Instructions

a. Prepare the journal entries required for the dividend declaration and payment, assuming that they occur simultaneously.

b. Could Conchita SA give the preference shareholders 2 years’ dividends and ordinary shareholders a 30 cents per share dividend, all in cash?