The following is the shareholders’ equity section of Suozzi Corp. at December 31, 2023:

^aThe preferred shares have a $2 dividend rate, are cumulative, and participate in distributions in excess of a $3 dividend on the common shares.

Instructions

a. No dividends were paid in 2021 or 2022. On December 31, 2023, Suozzi wants to pay a cash dividend of $4 per share to common shareholders. How much cash would be needed for the total amount to be paid to preferred and common shareholders? Do not round the intermediate excess return percentage when determining the participating preferred share dividend, but round final amounts to the nearest dollar.

b. The company decides instead that it will declare a 15% stock dividend on the outstanding common shares at their fair value. The common shares’ fair value on the date of declaration is $45 per share. Prepare the entry on the date of declaration.

c. The company decides instead to acquire and cancel 10,500 common shares at the current fair value of $45 per share. Prepare the entry to record the retirement, assuming the contributed surplus balance arose from previous cancellations of common shares.

Transcribed Image Text:

Preferred shares, authorized 100,000 shares; issued 25,000 shares Common shares (unlimited authorized, 60,000 issued) Contributed surplus Total paid-in capital Retained earnings Total shareholders' equity $ 750,000 1,800,000 150,000 2,700,000 2,470,500 $ 5,170,500