Data Table y the d s blank Stockholders Equity Preferred sto

Data Table y the d s blank.) Stockholders\' Equity Preferred stock, 7.5% cumulative-par value $30 per share; authorized 110,000 shares in each class ·.. Class A- issued 76,000 shares Class B-issued 99,000 shares 2,970,000 Explanatio the sum en cred Common stock $5 par value: e Class authorized 2,100,000 shares, issued 280,000 shares 1,400,000 5 0,000 8,380,000 S 20,550,000 Print Done e Class or enter any number in the input fields and then continue to the next question.

Solution

Requirement 1:

The company has the following types of shares outstanding - Class A preferred stock, Class B preferred stock and common stock.

Requirement 2:

Entry 1:- Cash account Dr. $2,280,000

To Preferred stock Class A account. $2,280,000

Entry 2:- Cash account Dr. $2,970,000

To preferred stock Class B account. $2,970,000

Entry 3:- Cash account Dr. $6,920,000

To Common stock account. $1,400,000

To additional paid in capital account $5,520,000

Requirement 3:- Yes the company will have to pay the 3 year dividend it passed on preferred stock in arrears before declaring any dividend on it\'s common stock as the preferred stock is cumulative in nature. This means that the dividend liability of the company on such cumulative preferred stock gets carried forward to the next year of not paid.

Requirement 4:- The company has to pay the following dividend on preferred stock each year to avoid having any arrears of preferred stock dividend = (2,280,000 + 2,970,000)*7.5% = $393,750

Requirement 5:- Assuming that the amount given in the question to be declared as dividend pertains to common stock, following entry shall be passed:-

Dividend on preferred stock in arrears Dr. $393,750

Dividend on preferred stock Dr. $393,750

Dividend on common stock Dr. $820,000

To Cash account. $1,607,500