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7. Beverage Inc. issued $15 million of $1 par preferred stock on February 1, 2016. The company issued 1 million shares. The preferred stock has

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7. Beverage Inc. issued $15 million of $1 par preferred stock on February 1, 2016. The company issued 1 million shares. The preferred stock has a 8% fixed annual cash dividend and has no maturity date. Assume the holder of the preferred shares has the option to require redemption. Requirements How would Beverage account for the preferred stock dividends? a. What is the journal entry when the firm issued the preferred shares? b. Requirement a. How would Beverage account for the preferred stock dividends? If Beverage were a U.S. GAAP reporter then A. the entire proceeds would be classified as equity. Dividends are a reduction of equity. B. the shares would be class ified as equity and the fixed dividend characteristic of the share would be recorded as a liability at its nominal value. C. the entire proceeds would be classified as liability. Dividends are a reduction of equity D. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at the present value of an annuity. Requirement b. What is the journal entry when the firm issued the preferred shares? (Record debits first, then credits. Exclude explanations from any journal entries. Enter amounts in dollars instead of millions.) Account Februay 1, 2016 (1) (3) (4) 8. Expo Inc. issued $25 million of $8 par preferred stock on February 1, 2016. The company issued 1 million shares. The preferred stock has a 5% fixed annual cash dividend and has no maturity date. Assume the holder of the preferred shares has the option to require redemption. Expo is an IFRS reporter. Prepare the journal entry for when Expo issued the preferred shares. (Record debits first, then credits. Exclude explanations from any journal entries. Enter amounts in dollars instead of millions.) Account Februay 1, 2016 1 (2) (3) (4) 7. Beverage Inc. issued $15 million of $1 par preferred stock on February 1, 2016. The company issued 1 million shares. The preferred stock has a 8% fixed annual cash dividend and has no maturity date. Assume the holder of the preferred shares has the option to require redemption. Requirements How would Beverage account for the preferred stock dividends? a. What is the journal entry when the firm issued the preferred shares? b. Requirement a. How would Beverage account for the preferred stock dividends? If Beverage were a U.S. GAAP reporter then A. the entire proceeds would be classified as equity. Dividends are a reduction of equity. B. the shares would be class ified as equity and the fixed dividend characteristic of the share would be recorded as a liability at its nominal value. C. the entire proceeds would be classified as liability. Dividends are a reduction of equity D. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at the present value of an annuity. Requirement b. What is the journal entry when the firm issued the preferred shares? (Record debits first, then credits. Exclude explanations from any journal entries. Enter amounts in dollars instead of millions.) Account Februay 1, 2016 (1) (3) (4) 8. Expo Inc. issued $25 million of $8 par preferred stock on February 1, 2016. The company issued 1 million shares. The preferred stock has a 5% fixed annual cash dividend and has no maturity date. Assume the holder of the preferred shares has the option to require redemption. Expo is an IFRS reporter. Prepare the journal entry for when Expo issued the preferred shares. (Record debits first, then credits. Exclude explanations from any journal entries. Enter amounts in dollars instead of millions.) Account Februay 1, 2016 1 (2) (3) (4)

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