Hodge Corporation issued 117,000 shares of $18 par value, cumulative, 8% preferr

Question

Hodge Corporation issued 117,000 shares of $18 par value, cumulative, 8% preferred stock on January 1, 2014, for $2,682,000. In December 2016, Hodge declared its first dividend of $833,300.

Prepare Hodge’s journal entry to record the issuance of the preferred stock. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation
Debit
Credit

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If the preferred stock is not cumulative, how much of the $833,300 would be paid to common stockholders?

Common Stock Dividends
$

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If the preferred stock is cumulative, how much of the $833,300 would be paid to common stockholders?

Common Stock Dividends
$

Explanation / Answer

Prepare Hodge’s journal entry to record the issuance of the preferred stock.

If the preferred stock is not cumulative, how much of the $833,300 would be paid to common stockholders?

First dividend will be paid to preferred stockholders :- 2106000 * 8 % = $ 168480

Remaining will be distributed as Common Stock Dividends = 833300 - 168480 = $ 664820

If the preferred stock is cumulative, how much of the $833,300 would be paid to common stockholders?

First dividend will be paid to preferred stockholders :- 2106000 * 8 % * 3 years ( since there is arrear for 2 years ) = $ 505440

Remaining will be distributed as Common Stock Dividends = 833300 - 505440 = $ 327860

Cash $2,682,000 preferred stock ( 117000 * 18 ) 2106000 Additional Paid up capital - preferred stock 576000

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