Chapter 10, Problem 10.78AP

(Learning Objectives 2, 4: Analyze stockholders’ equity and dividends of a corporation) Seasonal Outdoor Furniture Company included the following stockholders’ equity on its year-end balance sheet at March 31, 2019:

Stockholder’ Equity
Preferred stock, 3.5% cumulative—par value $10 per share;
authorized 140,000 shares in each class
Class A—issued 70,000 shares...............................	$ 700,000
Class B—issued 98,000 shares................................	980,000
Common stock—$5 par value:
authorized 1,000,000 shares,
issued 270,000 shares.................................................	1,350,000
Additional paid-in capital—common.............................	5,540,000
Retained earnings...........................................................	8,310,000
	$16,880,000

Requirements

1. 1. Identify the different issues of stock that Seasonal Outdoor Furniture Company has outstanding.
2. 2. Give the summary entries to record the issuance of all the Seasonal stock. Assume that all the stock was issued for cash. Explanations are not required.
3. 3. Suppose Seasonal 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. 4. What amount of preferred dividends must Seasonal declare and pay each year to avoid having preferred dividends in arrears?
5. 5. Assume that preferred dividends are in arrears for 2017. Journalize the declaration of an $860,000 dividend on March 31, 2019. An explanation is not required.