Question

Problem 4: Stock Issuance and cash dividends (12 pts) On Feb. 12, 2017, MorningStar Industries issued 7 million of its $0.01 par common shares at $13 per share, for aggregate gross proceeds $91,000,000. MorningStar received net proceeds of $89,600,000, after deducting promotional and accounting fees of $1,400,000 to effect the issue. Required: Prepare the journal entry to record the above transaction (5 pts). Cash Commmon Stock Paid-In Capikl-Excess of par Besides the above common stock, MorningStar also has $5,000, 000 par of 3% cumulative nonparticipating preferred stock. The board of directors declared and paid cash dividends of $120,000 in 2017, its first year of operation. In 2018 and 2019, the board declared and paid cash dividends of $200,000 and $160,000, respectively. Required: Determine the amounts of dividends preferred and common shareholders received in 2017, 2018, and 2019 respectively (7 pts).

Answer 1

Dividends - Prefered Stock paid schedule 2017 ooo 2018 $ 120000 $180000 2019 $150000 commm Stock 1 0 $ 20000 $10000 * for preferred stock if dividend is not paid fully on in one year then it will be accumulated and paid in next year. c

Journal Entry Shares = 1000000 paš value $010/ / share. Debit Credit 100 cash /Bank Promo bimal ce Accounting fee $89600000 $ 1400000 $70000 common stock paid in capital- excess of par Value $90930000 First then dividends are paid to preferred after to common stock. stock and 2018 stock evory Dividend year is payable 3% to preferred (5000000) = $150000..