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Issue: On November 1, the company issued 10,000 preferred shares to a private investor at a cost of $100 each. The shares have a
Issue: On November 1, the company issued 10,000 preferred shares to a private investor at a cost of $100 each. The shares have a mandatory redemption price of $100 per share, and each year 1,000 shares must be redeemed, commencing in 2027. The shares have a monthly dividend of $0.85, which is cumulative and must be paid on redemption. Analysis: The shares must be recognized as equity, and the dividend is recognized as debt. Recommendation: Therefore the shares are recognized at $100 x 10,000. This increases equity. Dividends are recorded monthly as Dr. Retained earnings, Cr. Cash (0.85 x 10,000). This decreases equity. NA NC RC C CD Comments:
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