Question

Question 4 Bridgeport Corporation has 8,400 shares of $100 par value, 8%, preferred stock and 49,600 shares of $10 par value common stock outstanding at December 31, 2020. 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, 2017, what are the dividends in arrears on December 31, 2020, balance sheet? The amount of dividends in arrears on the December 31, 2020 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 3,400 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 manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Account Titles and Explanation Debit Credit Dividends Payable (c) If the preferred stock was issued at $106 per share, how should the preferred stock be reported in the stockholders' equity section? (Enter account name only and do not provide descriptive information.) Bridgeport Corporation Balance Sheet (Partial) $ Click if you would like to Show Work for this question: Open Show Work

Answer 1

Part A

The amount of dividends in arrears on the Dec 31, 2020 (2018, 2019 and 2020 = 3 years) ((8400*100*8%)*3)	$        201,600	This amount will disclosed under the notes to the stockholders’ equity section.
The cumulative dividend	is not reported	as a liability.

Part B

Date	Accounts titles and explanation		Debit	Credit
(B)	Preferred stock (3400*100)		$        340,000
	Common stock (3400*10*7)			$        238,000
	Paid-in capital in excess of par - common stock (340000-238000)			$        102,000

Part C

Balance sheet
Paid in capital
Preferred stock (8400*100)		$        840,000
Paid-in capital in excess of par - preferred stock (8400*(106-100))		$          50,400