Reckless Phones Ltd. included the following shareholders' equity on its year-end balance sheet at December 31, 2017:
Shareholders' Equity
Preferred shares, $0.25, cumulative, unlimited authorization,
10,000 shares issued and outstanding ....................................... $ 32,500
Common shares, unlimited authorization, 230,000 shares issued
and outstanding ................................................................ 100,000
Retained earnings .............................................................. 1,000,000
Total shareholders' equity ..................................................... $1,132,500
Required
1. Identify the different issues of shares that Reckless has outstanding.
2. Are the preferred shares cumulative or noncumalative? How can you tell?
3. Give two summary journal entries to record issuance of all the Reckless shares on August 31, 2017. All the shares were issued for cash. Explanations are not required.
4. Assume that preferred dividends are in arrears for 2016. Record the declaration of a $15,000 dividend on December 31, 2017. Use separate Dividends Payable accounts for preferred shares and common shares.