Elegant Outdoor Furniture Company included the following stockholders equity on its year-end balance sheet at February 28, 2011:

Stockholders' Equity

Preferred stock, 6.5% cumulative par value $35 per share;

authorized 110,000 shares in each class.....................

Class A issued 78,000 shares ............................... $ 2,730,000

Class B issued 89,000 shares................................ 3,115,000

Common stock $3 par value.................................

authorized 1,200,000 shares,

issued 290,000 shares........................................... 870,000

Additional paid-in capital common...................... 5,530,000

Retained earnings................................................. 8,390,000

$20,635,000

Requirements

1. Identify the different issues of stock Elegant Outdoor Furniture Company has outstanding.

2. Give the summary entries to record issuance of all the Elegant stock. Assume that all the stock was issued for cash. Explanations are not required.

3. Suppose Elegant passed its preferred dividends for three years. Would the company have to pay those dividends in arrears before paying dividends to the common stockholders? Give your reason.

4. What amount of preferred dividends must Elegant declare and pay each year to avoid having preferred dividends in arrears?

5. Assume that preferred dividends are in arrears for 2010. Record the declaration of an $860,000 dividend on February 28, 2011. An explanation is not required.