Corporation issued 100,000 shares of $20 par value, cumulative, 8% preferred stock on January 1, 2009, for

Question:

Corporation issued 100,000 shares of $20 par value, cumulative, 8% preferred stock on January 1, 2009, for $2,100,000. In December 2011, AI declared its first dividend of $500,000.

Instructions

(a) Prepare AI’s journal entry to record the issuance of the preferred stock.

(b) If the preferred stock is not cumulative, how much of the $500,000 would be paid to common stockholders?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...