Steeltrap Security Inc. included the following shareholders' equity on its balance sheet at December 31, 2014:

Shareholders' Equity ($ millions)

Preferred Shares:

Authorized 20,000 shares in each class:

$5.00 Cumulative Preferred Shares, 2,500 shares issued.............................. $ 125,000

$2.50 Cumulative Preferred Shares, 4,000 shares issued................................. 100,000

Common Shares:

Authorized 80,000 shares, issued 48,000 shares ............................................. 384,000

Retained earnings............................................................................................. 529,000

......................................................................................................................$1,138,000

Requirements

1. Identify the different issues of shares Steeltrap Security has outstanding.

2. What was the value at which the $2.50 Cumulative Preferred Shares were issued?

3. Suppose Steeltrap decided not to pay its preferred dividends for one year. Would the company have to pay these dividends in arrears before paying dividends to the common shareholders? Why?

4. What amount of preferred dividends must Steeltrap declare and pay each year to avoid having preferred dividends in arrears?

5. Assume preferred dividends are in arrears for 2013. Journalize the declaration of a $50,000 cash dividend for 2014. No explanation is needed.