Whitman Outdoor Furniture Company included the following stockholders’ equity on its year-end balance sheet at February 28, 2015:
Stockholders’ Equity
Preferred stock, 6.5% cumulative—par value $15 per share;
authorized 110,000 shares in each class
Class A—issued 75,000 shares............................... $ 1,125,000
Class B—issued 96,000 shares................................ 1,440,000
Common stock—$10 par value:
authorized 2,000,000 shares,
issued 245,000 shares................................................. 2,450,000
Additional paid-in capital—common.........................4,570,000
Retained earnings.......................................................8,890,000
$18,475,000
Requirements
1. Identify the different issues of stock that Whitman Outdoor Furniture Company has outstanding.
2. Give the summary entries to record issuance of all the Whitman stock. Assume that all the stock was issued for cash. Explanations are not required.
3. Suppose Whitman passed its preferred dividends for three years. Would the company have to pay those dividends in arrears before paying dividends to the common stockholders? Give your reason.
4. What amount of preferred dividends must Whitman declare and pay each year to avoid having preferred dividends in arrears?
5. Assume that preferred dividends are in arrears for 2014. Journalize the declaration of an $825,000 dividend on February 28, 2015. An explanation is not required.