Please explain/show work if possible. Thank you. Hodge Corporation issued 100,00

Question

Please explain/show work if possible. Thank you.

Hodge Corporation issued 100,000 shares of $20 par value, cumulative, 6% preferred stock on Jan 1 2013, for $2,300,000. In Decmber 2015, Hodge declared its first dividend of $500,000.

1. Prepare the journal entry to record the issuance of the perferred stock.

2. If preferred stock is NOT cumulative, how much of the $500,000 would be paid to the COMMON stockholders.

3. If the preferred stock is cumulative, how of the $500,000 would be paid to COMMON stockholders.

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Cash Dr. 2300000

6% Preferred Stock Cr. 2000000

Premium on Issue of Preferred Stock Cr. 300000

Part B:

Amount Paid to Common Stockholders = 500000 - 20*100000*6% = 380000

Part C:

Amount Paid to Common Stockholders = 500000 - 20%*100000*6%*3 = 140000 (dividend will be accumulated over the period 1 Jan 2013 till 31st December 2015, hence 3 Years)

Thanks.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects