P10-87B. (Learning Objectives 2, 4: Analyzing the shareholders’ equity and dividends of a corporation) Rustic Outdoor Furniture Company included the following shareholders’ equity on its year-end Balance Sheet at February 28, 20X7:

Requirements 1. Identify the different issues of shares Rustic Outdoor Furniture Company has outstanding.
2. Give the summary entries to record issuance of all the Rustic shares. Assume that all the shares were issued for cash. Explanations are not required.
3. Suppose Rustic passed its preference dividends for three years. Would the company have to pay these dividends in arrears before paying dividends to the ordinary shareholders? Give your reasons.
4. What amount of preference dividends must Rustic declare and pay each year to avoid having preference dividends in arrears?
5. Assume that preference dividends are in arrears for 20X6. Record the declaration of an €840,000 dividend on February 28, 20X7. An explanation is not required.

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Shareholders' Equity Preference share, 4.0% cumulative-par value 20 per share authorized 100,000 shares in each class. Class A-issued 77,000 shares.. Class B-issued 98,000 shares..... Ordinary share-4 par value:...... authorized 1,500,000 shares, issued 240,000 shares...... Additional paid-in capital-ordinary. Retained earnings..... 1,540,000 1,960,000 960,000 5,328,000 8,310,000 18,098,000