Macintosh Browning Corporation has the following stockholders’ equity at December 31, 1999:

Seven percent cumulative preferred stock: $120 par, 50,000 shares authorized, 20,000 shares issued and outstanding $2,400,000 Common stock: $10 par, 500,000,000 shares authorized, 300,000 shares issued 3,000,000 Additional paid-in capital 900,000 Total contributed capital 6,300,000 Retained earnings 1,200,000 Treasury stock (74,000 shares of common stock) (1,110,000)

Total stockholders’ equity $6,390,000 Required

a. Why did Macintosh issue preferred stock? What does the seven percent cumulative term indicate?

b. Assume that the board of directors has not declared a dividend in the past three years (the preferred stock was outstanding during these years). What is the amount of dividends outstanding for the previous three years on these cumulative shares?

c. Why might Macintosh prefer preferred stock rather than additional debt?

d. If the board declared and paid dividends to the preferred and common shareholders during the year, show the effects (use and  and ignore $

amounts) on stockholders’equity on the date of declaration, date of record, and date of payment.