Kari Corporation issues 5,000, $4 cumulative preferred shares (convertible into four common shares apiece) at $80, and
Question:
2013 Jan. 10 Paid $12,000 of annual dividends to preferred shareholders.
2014 Jan. 10 Paid annual dividend to preferred shareholders and a $4,000 dividend to common shareholders.
Mar. 1 The preferred shares were converted into common shares.
Instructions
(a) Journalize each of the 2013 and 2014 transactions.
(b) Are there any additional reporting requirements regarding preferred share dividends in either 2013 or 2014?
(c) What factors affect preferred shareholders' decision to convert their shares into common shares?
Taking It Further
Why might investors be willing to pay more for preferred shares that have a conversion option?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Related Book For
Accounting Principles Part 3
ISBN: 978-1118306802
6th Canadian edition Volume 1
Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Kinnear, Joan E. Barlow
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