Gourmet Inc. issued $24 million of $1 par preferred stock on February 1, 2018. The company issued 1 million shares. The preferred stock has a 6% fixed annual cash dividend and no maturity date. Assume that the holder of the preferred shares has the option to require redemption. Requirements a. How would Gourmet account for the preferred stock dividends? b. What is the journal entry when the firm issued the preferred shares? Requirement a. How would Gourmet account for the preferred stock dividends? If Gourmet were a U.S. GAAP reporter then A. the entire proceeds would be classified as liability. Dividends are a reduction of equity. ○ B. the entire proceeds would be classified as equity. Dividends are a reduction of equity. ○ C. 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. D. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at its nominal value. Click to select your answer and then click Check Answer. ?
Gourmet Inc. issued $24 million of $1 par preferred stock on February 1, 2018. The company issued 1 million shares. The preferred stock has a 6% fixed annual cash dividend and no maturity date. Assume that the holder of the preferred shares has the option to require redemption. Requirements a. How would Gourmet account for the preferred stock dividends? b. What is the journal entry when the firm issued the preferred shares? Requirement a. How would Gourmet account for the preferred stock dividends? If Gourmet were a U.S. GAAP reporter then A. the entire proceeds would be classified as liability. Dividends are a reduction of equity. ○ B. the entire proceeds would be classified as equity. Dividends are a reduction of equity. ○ C. 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. D. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at its nominal value. Click to select your answer and then click Check Answer. ?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter16: Retained Earnings And Earnings Per Share
Section: Chapter Questions
Problem 19E: Lyon Company shows the following condensed income statement information for the year ended December...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:
9781337788281
Author:
James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning