Fontlyn Inc. issued $20 million of $10 par preferred stock on February 1, 2018. The company issued

Question:

Fontlyn Inc. issued $20 million of $10 par preferred stock on February 1, 2018. The company issued 1 million shares. The preferred stock has a 4% fixed annual cash dividend and no maturity date. Assume that the holder of the preferred shares has the option to require redemption.

a. How would Fontlyn account for the preferred stock dividends?

b. What is the journal entry when the firm issued the preferred shares?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...

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