Gourmet Inc. issued $24 million of $1 par preferred stock on February 1, 2018. The company...

  

 
 

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Gourmet Inc. issued $24 million of $1 par preferred stock on February 1, 2018. The company issued 1 million shares. The preferred stock has a 6% fixed annual cash dividend and no maturity date. Assume that the holder of the preferred shares has the option to require redemption. Requirements a. b. How would Gourmet account for the preferred stock dividends? What is the journal entry when the firm issued the preferred shares? Requirement a. How would Gourmet account for the preferred stock dividends? If Gourmet were a U.S. GAAP reporter then A. the entire proceeds would be classified as liability. Dividends are a reduction of equity. B. the entire proceeds would be classified as equity. Dividends are a reduction of equity. C. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at the present value of an annuity. D. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at its nominal value. Click to select your answer and then click Check Answer. ? Gourmet Inc. issued $24 million of $1 par preferred stock on February 1, 2018. The company issued 1 million shares. The preferred stock has a 6% fixed annual cash dividend and no maturity date. Assume that the holder of the preferred shares has the option to require redemption. Requirements a. b. How would Gourmet account for the preferred stock dividends? What is the journal entry when the firm issued the preferred shares? Requirement a. How would Gourmet account for the preferred stock dividends? If Gourmet were a U.S. GAAP reporter then A. the entire proceeds would be classified as liability. Dividends are a reduction of equity. B. the entire proceeds would be classified as equity. Dividends are a reduction of equity. C. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at the present value of an annuity. D. the shares would be classified as equity and the fixed dividend characteristic of the share would be recorded as a liability at its nominal value. Click to select your answer and then click Check Answer. ?

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a b Preferred stock is recorded as liability on declaration of dividend at the end of t... View the full answer