Knudsen Bakeries was organized on January 1, 2019. During its first year, the company issued 2,000 shares of HK$50 par value preference shares and 100,000 shares of HK$10 par value or dinary shares. At December 31, the company declared the following cash dividends: 2019, HK$5,000 2020, HK$12.000; and 2021, HK$28,000 (HK$ in thousands).
Instructions

a. Show the allocation of dividends to each class of shares, assuming the preference share dividend is b. Show the allocation of dividends to each class of shares, assuming the preference share dividend is c Journalize the declaration of the cash dividend at December 31, 2021. under part (b). 

Answer:

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Notes:

a) In case of non-cumulative preference dividend, the amount of preference dividend not paid in a year will not be carried forward to next year. Remaining amount of cash dividend left after the payment of preference dividend is paid as ordinary dividend.

b) In case of cumulative preference dividend, the amount of preference dividend not paid in a year will be carried forward to the next year. Ordinary dividend is paid after the payment of preference dividend.