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Unformatted text preview: Cash (+A) (+SE)
Capital, 10% Preferred Stock (+SE) 3,800
Preferred Stock (10%)
1,800 Issued preferred stock.
(3 ) Cash (+A) PaidIn Capital, Treasury Stock (+SE)
Reissued treasury stock.
(4 ) 10% Preferred Cash Dividend (–SE) 660
Treasury Stock (+SE)
Dividends Payable (+L)
750 Declared cash and stock dividend.
a Cumulative preferred dividends are paid first. Since no dividends have been paid since 1998, dividends in arrears in the amount of $1,000 (10 years of 10% of par value) on the 10% cumulative
Preferred stock must be paid before any dividends can be paid on any other shares. The entire
$750 payment goes to the cumulative shares.
(5 ) Dividends Payable (–L) 750
750 Paid and issued dividend.
(6 ) No journal entry is needed. A memorandum entry should be made stating that the company's
common stock now has a par value of $.50 per share and that 7,000 shares are now issued
and 840 shares [after the events underlying entries (1) and (3)] are held in treasury. P12–9
b. Concluded Preferred stock (10%, $10 par value, cumulative)
Preferred stock (12%, $10 par value, noncumulative)...
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