Answer:
(a)
Preferred stock Dividend = ( 10,000 x 100 ) x 8% = $80,000
Cumulative Dividend
Date Dividend for the year Balance
December 31, 2015 $80,0000 $80,000
December 31, 2016 $80,0000 $160,000
December 31, 2017 $80,0000 $240,000
Payable of $240,000 Dividend will be reported on the Balance Sheet.
(b) Dr. Cr.
Preferred Stock (4,000 x $100) $400,000
Common stock ((4000 x 7) x $10) $280,000
Paid-In Capital in excess of Par - Common share $120,000
(c)
Cash ( 4000 x 107 ) $428,000
Preferred Stock (4000 x $100) $400,000
Paid-In Capital in excess of Par - Preferred share $28,000
It will be reported in balance sheet as follow:
Equity $
Preferred Stock 400,000
Paid-In Capital in excess of Par - Preferred share 28,000
Explanation:
(a) Last dividend was paid on December 31, 2014, the subsequent 3 years are outstanding until December 31, 2017, so the total payable dividend is $240,000 which will be reported on Balance sheet.
(b) 4000 preferred shares on par value are converted to 7 common shares each at $10 par value.
(c) Preferred stock issued @ $107 will be reported as Preferred stock of $400,000 and Paid-In Capital in excess of Par - Preferred share of $28,000.
