Parker Company has 2.000 shares of $100 par 6% cumulative preferred stock outsta
ID: 2489200 • Letter: P
Question
Parker Company has 2.000 shares of $100 par 6% cumulative preferred stock outstanding. The company did not pay the preferred dividends in 2014 or 2015. What amount of dividends must the company pay the preferred shareholders in 2016 if they wish to pay the common stockholders a dividend? Show your work for the calculation please. 6. On January 1. 2015, the stockholders' equity section of Nance Corporation shows: Common stock ($5 par value) $1,500,000; paid-in capital in excess of par value $1,000,000; and retained earnings $1, 200,000 During the year, the following treasury stock transactions occurred. Mar. 1 Purchased 30,000 shares for cash at $22 per share. July 1 Sold 6.000 treasury shares for cash at $27 per share. Sept. 1 Sold 5.000 treasury shares for cash at $19 per share. Instructions (a) Journalize the treasury stock transactions. (b) Restate the entry for September 1, assuming the treasury shares were sold at $12 per share.Explanation / Answer
(5)
Annual preferred dividend = 2,000 shares x $100 per share x 6% = $12,000
For cumulative preferred shareholders, any prefered dividend in arrear must be paid before a firm pays a common dividend. So,
Preferred dividend to be paid (for 3 years**) = $12,000 x 3 = $36,000
**2 years preferred dividend in arrea (2014 & 2015) and current preferred dividend for 2016
(6)
(a)
(i) Mar 1
DR Cash $660,000
Common stock $150,000
Additional paid-in capital $510,000
(To record share repurchase)
(ii) Jul 1
DR Common stock $30,000
DR Additional paid-in capital $162,000
Cash $192,000
(To record sale of treasury stock)
(iii) Sept 1
DR Common stock $25,000
DR Additional paid-in capital $70,000
Cash $95,000
(To record sale of treasury stock)
(b) Sept 1
DR Common stock $25,000
DR Additional paid-in capital $35,000
Cash $60,000
(To record sale of treasury stock)