Question

Wildhorse Corporation has 8,200 shares of $100 par value, 7%, preferred stock and 46,200 shares of $10 par value common stock outstanding at December 31, 2017 Answer the questions in each of the following independent situations. (a) If the preferred stock is cumulative and dividends were last paid on the preferred stock on December 31, 2014, what are the dividends in areas at December 1, 2017 Amount of dividends in arrears How should these dividends be reported? The cumulative dividend is as a liability (b) If the preferred stock is convertible into 7 shares of $10 par value common stock and 3,300 shares are converted, what entry is required for the conversion assuming the preferred stock was issued at par value? (Credit account titles are automatically indented when amount is entered. Do not indent m y . If no otry is rewind select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit stockholders'equity section (Enter account me only and do not (c) If the preferred stock was issued at $105 per share, how should the preferred provide descriptive information.)

Answer 1

af The dividends on cumulative preferred stock will be accumulated if they are not paid &e will be shown audy arrears. → dividend lastly paid on December 31, 2014. - current reporting period is December 31, 2017 ~ Therefore dividend is in arreals for 3 years. .: amount of arrears dividond in - 8200 shares x $100 X 7% x 3 years = $172,200 as The arstears Liability in arrears of of preferred dividend is shown Balance sheet as followe, preferred dividend = $172, 200. number of Il preferred shares to be convested = 3300 Share into 7 shalls of each preferred common stock istock is convestible of $10 pauvalue. conversion : increase in common stock 3300 shales x due to $10 7 x § $ 237,000. I decrease in prefereed stock due to convension 3300 Shary x $1000 $3,33 $ 339000 = $ 102.000 Loss on conversion = 333000 - 231000 =

The loss should on conversion on Conversion should be adjusted premium account if available. suties it is to be to Securities priem If there is no adjusted against securitia reserves & poen supplere. 77 preferred stocky ate or Reserves & Surphy ate s to enly share capitol delst credit Account title Ee explanation 333 000 7% Alcore prefereed stock $23.000 S102000 to eacuity share capitel to Securities premium (being 7% preferred shock is converted into 7 ordinary shares at a pauvalue of $10 pe each shale) (c) If preferred stock is issued at $105 per share then $100 would be parvalue é $5 would be premium per shall wild horse Corporation Balance sheet partial Share holders earuity (i) 7% preferred stock $ 820000 (8Q00 shares $100) Seventies premium (8200 shall x $5) HOOD