Kari Corporation issues 5,000, $4 cumulative preferred shares at $80 each and 10,000 common shares at $18 each at the beginning of 2015. Each preferred share is convertible into four common shares. During the years 2016 and 2017, the following transactions affected Kari Corporation's shareholders' equity accounts:
2016
Jan. 10 Paid $12,000 of annual dividends to preferred shareholders.
2017
Jan. 10 Paid annual dividend to preferred shareholders and a $4,000 dividend to common shareholders.
Mar. 1 The preferred shares were converted into common shares.
Instructions
(a) Journalize each of the 2016 and 2017 transactions.
(b) Are there any additional reporting requirements regarding preferred share dividends in either 2016 or 2017?
(c) After the preferred shares are converted, what is the total number of common shares issued?
TAKING IT FURTHER
What are retractable preferred shares and how do they compare with convertible preferred shares?