Chapter 13, Problem 9QS

To determine

Concept introduction:

Classes of stocks:

These are two types of the share capital of a company. Common Stock represents the Common shares issued to the shareholders and preferred stock represents the preference shares issued. Preference shares are given preference in payment of dividends and repayment of capital. Common shareholders get the inbuilt right to vote in decisions of the company and a preference shareholders generally do not get this right but they may get voting rights with special provisions.

Issuance of Stock:

A company issues common or preferred stock to collect the required amount of capital. Journal entry is made at the time of issuing the stock and receiving cash.

Cash dividend:

The Cash dividend is the amount of dividend paid to shareholders in cash. The Cash dividend is declared first and paid later. There are two journal entries made, one at the time of declaration of dividend and another at the time of payment.

Requirement-1:

To prepare: The Journal entry to record the issuance of preferred stock

To determine

Requirement-2:

To determine: The amount of preferred dividend