Kari Corporation issues 5,000, $4 cumulative preferred shares at $80 each and 10,000 common shares at $18 each at the beginning of 2019. Each preferred share is convertible into four common shares. The appropriate preferred share dividend was declared and paid in 2019. During the years 2020 and 2021, the following transactions aff ected Kari Corporation’s shareholders’ equity accounts:
2020
Jan. 10 Paid $12,000 of annual dividends to preferred shareholders.

2021
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 2020 and 2021 transactions.

b. Are there any additional reporting requirements regarding preferred share dividends in either 2020 or 2021?

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?