Chapter 10, Problem 10.86BP

(Learning Objectives 2, 4: Analyze stockholders’ equity and dividends of a corporation) Superior Outdoor Furniture Company included the following stockholders’ equity on its year-end balance sheet at February 28, 2019:

Stockholders’ Equity
Preferred stock, 7.5% cumulative—par value $25 per share;
authorized 130,000 shares in each class
Class A—issued 79,000 shares	$ 1,975,000
Class B—issued 94,000 shares	2,150,000
Common stock—$10 par value:
authorized 1,600,000 shares,
issued 260,000 shares	2,600,000
Additional paid-in capital—common	5,580,000
Retained earrings	8,360,000
	$20,865,000

Requirements

1. 1. Identify the different issues of stock that Superior Outdoor Furniture Company has outstanding.
2. 2. Give the summary entries to record the issuance of all the Superior stock. Assume that all the stock was issued for cash. Explanations are not required.
3. 3. Suppose Superior 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 reasons.
4. 4. What amount of preferred dividends must Superior 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 $900,000 dividend on February 28, 2019. An explanation is not required.