QUESTION III

You were getting the impression that your work at Jupp Jellies was ending when Ms$.$ Jell came up

with a "one last one please". She wanted all issues related to dividends to be cleared up once and

for all. She said she had some arguments with the internal auditor who thought all of Ms$.$ Jell's

computations were incorrect. "I could lose my job over this and be forced to return to Earth.

Take a quick look at this issue; I will first take you out for a great lunch and thereafter we can

finish this job together. You realize by now that I have been a great help to you all this time and I

am always around to lend a helping hand. Do please put in a good word for me with the BOSS."

Jupp Jellies runs a large operation on Saturn under a separate corporate entity, Titanic, Inc., and an

independent local management team. However, all strategic decisions are made by the home company.

Titan had reported a net income of $$1,700,000$ for $2018,$ a capital structure of $225,000$ common shares

with a contributed capital of $$5,500,000$; and $200,000$ cumulative preferred shares with a contributed

capital of $$2,000,000.$ Preferred share holders would receive a minimum dividend of $$2\mathrm{.}20$ but held

participating rights in the distribution of excess dividends. The last dividends declared by Titanic were

in $2014.$

In view of the excellent earnings for the past three years, the Titan management decided to declare a

dividend for $2018.$ It decided that the common share holders would be entitled to a dividend of $$9\mathrm{.}00$ per

share and the preferred share holders could participate in the excess based on the dividends to common

shareholders exceeding $$5\mathrm{.}80$ per share.

You took a quick glance at the information submitted and agreed to her proposal. She drew a long sigh

of relief. "I am so glad you saved my job. You are now my real hero! Lunch is on me$,"$ she stated

gratefully. Following a most sumptuous meal of space burgers, a Martian red salad and an orange jelly

shake, you settle down to resolving the questions contained in her list below.

Required:

You were asked to prepare a well formatted schedule showing the following:

a$]$ The total amount of dividends which the management would declare; and

b$]$ The total amounts payable to each group of shareholders.

c$]$ The appropriate journal entry made upon the declaration of the dividend.