Seasonal Outdoor Furniture Company included the following stockholders equity on its year-end balance sheet at February 28, 2011:
Stockholders’ Equity
Preferred stock, 4.0% cumulative par value $20 per share
authorized 100,000 shares in each class .....................
Class A issued 76,000 shares...................................... $ 1,520,000
Class B issued 97,000 shares....................................... 1,940,000
Common stock $4 par value........................................
authorized 1,500,000 shares, issued 250,000 shares...... 1,000,000
Additional paid-in capital common ............................ 5,520,000
Retained earnings........................................................ 8,320,000
$18,300,000
Requirements
1. Identify the different issues of stock Seasonal Outdoor Furniture Company has outstanding.
2. Give the summary entries to record issuance of all the Seasonal stock. Assume that all the stock was issued for cash. Explanations are not required.
3. Suppose Seasonal passed its preferred dividends for three years. Would the company have to pay these dividends in arrears before paying dividends to the common stockholders? Give your reasons.
4. What amount of preferred dividends must Seasonal 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 $840,000 dividend on February 28, 2011. An explanation is not required.